Oil Steady as U.S. Default Risk Offsets Demand Outlook

Brent crude futures rose 17 cents, or 0.2%, to $75.75 a barrel by 1111 GMT, while U.S. West Texas Intermediate (WTI) crude for July delivery, the more actively traded contract, rose 15 cents, or 0.2%, to $71.84.

The June WTI contract , which expires later on Monday, rose 7 cents to $71.62 a barrel.

Talks to avert a default on U.S. debt were set to resume in Washington on Monday, as the prospect of a default and resulting possible economic downturn and cooling of fuel demand continued to spook markets.

Still, the International Energy Agency (IEA) warned of a looming shortage in the second half when demand is expected to eclipse supply by almost 2 million barrels per day (bpd), the Paris-based agency said in its latest monthly report.

“I expect plenty of volatility in the coming days and a bounce upward in crude prices as and when a deal is reached to raise the debt ceiling,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Last week, both oil benchmarks gained about 2%, their first weekly gain in five, after wildfires shut in large amounts of crude supply in Alberta, Canada.

The impact of voluntary production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, is also being felt after going into effect this month.

Total exports of crude and oil products from the group plunged by 1.7 million barrels per day (bpd) by May 16, JP Morgan said, adding that Russian oil exports will likely fall by late May.

On Saturday, the Group of Seven (G7) nations pledged at its annual leaders’ meeting to enhance efforts to counter Russia’s evasion of the price caps on its oil and fuel exports “while avoiding spillover effects and maintaining global energy supply”, but did not provide details.

Those moves are not expected to change the supply situation for crude and oil products, the IEA Executive Director Fatih Birol told Reuters on the sidelines of the G7 summit.