Short-covering boosts crude oil prices, but concerns about the U.S. debt ceiling weigh

The U.S. debt ceiling uncertainty and resurrected concerns for a regional banking crisis in the United States limited advances in the early Asian trading on Friday as traders covered short positions in anticipation of the weekend.

In the morning session, Brent crude futures were up 36 cents, or 0.5%, to $75.34 per barrel. To reach $71.28, U.S. crude futures increased by 41 cents, or 0.6%. Over the previous two sessions, they regained some of the losses of roughly 3%–4%.

After three straight weeks of losses, both benchmarks were expected to show little change for the week. When oil prices remain continuously at or below $67 to $72 per barrel, the U.S. government has stated that it will purchase oil.

On Thursday, U.S. Treasury Secretary Janet Yellen urged Congress to increase the $31.4 trillion federal debt ceiling in order to prevent an unprecedented default that would lead to a slump in the world economy.

Shares of PacWest Bancorp fell 23% on Thursday, increasing concerns about a regional banking crisis in the United States. The Los Angeles-based lender said that its deposits had decreased and that, in order to increase its liquidity, it had provided the U.S. Federal Reserve with more collateral. Investors remained cautious due to worries over China’s sluggish demand.

China’s consumer pricing data for April increased at a slower rate and fell short of forecasts, while factory gate deflation increased, indicating that additional stimulus measures may be required to strengthen the shaky post-COVID-19 economic recovery. The Organisation of the Petroleum Exporting Countries’ (OPEC) global oil demand prediction for 2023, which predicted that China’s demand, the world’s largest oil importer, would rise, was largely disregarded by the oil market.

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