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Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Oil Prices Recover amid US Banking Fears


Fri 12 May 2023 | 03:38 PM
By Ahmad El-Assasy

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

By 12.51am GMT, Brent crude futures were up 36c, or 0.5%, to $75.34 per barrel. At $71.28, US crude futures increased by 41c, 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.

According to Hiroyuki Kikukawa, president of NS Trading, a division of Nissan Securities, "traders covered short positions ahead of the weekend, but concerns over a political standoff over the US debt ceiling and increased worries about a US regional banking crisis limited gains."

The market's gloomy sentiment would probably last until next week, he added, "also with lingering fears over a slow recovery in China's fuel demand."

Prices will be supported, however, by rumours that the US would repurchase oil for the Strategic Petroleum Reserve (SPR) if WTI drops to around $70 per barrel, noted Kikukawa.

The US government has said that it will purchase oil if the price per barrel is regularly between $67 and $72.

US Treasury Secretary Janet Yellen urged Congress on Thursday to increase the $31.4 trillion federal debt ceiling in order to prevent an unprecedented default that would lead to a downturn in the world economy.

Following Thursday's 23% decline in PacWest Bancorp's stock, concerns about a regional banking crisis in the US increased. The Los Angeles-based lender said that its deposits had decreased and that, in order to increase its liquidity, it had provided the US Federal Reserve with more collateral.