Oil markets regained some of their gains in early Asian trading on Friday, as traders engaged in short covering ahead of the weekend, but uncertainty surrounding the US debt ceiling and renewed concerns about a banking crisis in the United States limited gains.
By 00:51 GMT, Brent crude futures rose 36 cents, or 0.5%, to $75.34 a barrel. US crude futures rose 41 cents, or 0.6%, to $71.28. The two benchmarks recovered from losses ranging between 3 and 4% during the past two sessions.
For the week, the two benchmarks are heading for little change after falling for three consecutive weeks.
“Traders covered short positions ahead of the weekend, but concerns about a political standoff over the US debt ceiling and growing fears of a regional banking crisis in the United States limited gains,” said Hiroyuki Kikukawa, president of NS Trading subsidiary of Nissan Securities.
“Also, with continued concerns about the slow recovery of Chinese fuel demand, the bearish mood in the market is likely to continue during the next week,” he added.
Kikukawa said prices would be supported by speculation that the United States might buy back oil for the Strategic Petroleum Reserve if WTI fell to around $70 a barrel.
The US government has said it will buy oil when prices are stable in the range of $67-72 a barrel or less.
US Treasury Secretary Janet Yellen urged Congress on Thursday to raise the $31.4 trillion government debt ceiling and avoid an unprecedented default that could lead to a global recession.
Concerns also increased about a regional banking crisis in the United States, after shares of Bacoist Bancorp fell 23% yesterday. The Los Angeles-based bank said its deposits had shrunk and it was seeking to boost liquidity.
The oil market has largely ignored the forecasts of the Organization of the Petroleum Exporting Countries (OPEC) for global oil demand in 2023, which included the expectation of increased demand in China, the world’s largest oil importer.