Oil prices slipped on Tuesday as investor concern over the risk of a U.S. debt default dampened risk appetite, although a tighter market due to a seasonal rise in gasoline demand and supply cuts from OPEC+ producers lent support.
President Joe Biden and House Speaker Kevin McCarthy ended talks on Monday with no agreement on how to raise the U.S. government’s $31.4 trillion debt ceiling and will keep talking with just 10 days before a possible default.
Brent crude fell 26 cents, or 0.3%, to $75.73 a barrel by 0807 GMT while U.S. West Texas Intermediate (WTI) crude slipped by 24 cents, or 0.3, to $71.81. Both had risen earlier in the session.
“The tug-of-war continues at the negotiating tables. No breakthrough yet,” said Tamas Varga of oil broker PVM.
“Macro sentiment will remain the dominant price driver in the foreseeable future.”
Crude rose on Monday, gaining a tailwind from a 2.8% increase in U.S. gasoline futures ahead of the Memorial Day holiday on May 29 that traditionally marks the start of the peak summer demand season.
As well as gasoline demand, the onset in May of voluntary production cuts by several members of the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, is also expected to tighten supply.
“Oil prices are consolidating their bottoms, helped by a seasonal increase in U.S. gasoline demand from next week,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Kikukawa also cited planned U.S. purchases to refill the Strategic Petroleum Reserve, after record sales last year as part of a strategy to stabilise prices in the aftermath of Russia’s invasion of Ukraine.
Also coming onto the radar is the latest U.S. inventory data, which analysts expect to show a small rise in crude stocks. The first of the week’s two reports, from the American Petroleum Institute, is out at 2030 GMT.