Investing.com -- Oil prices rose in Asian trade on Monday as U.S. lawmakers said they had reached a provisional agreement to raise the debt ceiling, with focus now turning to key Chinese data this week for cues on the world’s largest oil importer.
Top Democrat and Republican lawmakers said over the weekend that they had reached a tentative budget agreement to avert a potential debt default, which could have dire consequences for the global economy.
The deal is now set to face a vote in Congress before it is passed into law. But some members of the house expressed discontent with the deal and threatened to block it.
Still, the deal helps ease some concerns over an imminent U.S. default, after weeks of intense negotiations kept oil markets on edge. The prospect of a default tied into fears that worsening economic conditions will erode oil demand this year.
Brent oil futures rose 0.8% to $77.56 a barrel, while West Texas Intermediate crude futures rose 0.9% to $73.33 a barrel by 21:24 ET (01:24 GMT). Oil was also supported by the prospect of increased U.S. fuel demand thanks to the memorial day weekend, which usually heralds the beginning of the travel-heavy summer season.
Focus this week is now on key manufacturing and services activity readings from China, which are expected to shed more light on a rebound in the world’s largest oil importer. Signs of a slowdown in Chinese crude demand had rattled oil markets through May, putting them on course for a fifth straight month of losses.
Crude markets remained on edge over strength in the dollar, which steadied around a two-month high against a basket of currencies on Monday. Stronger-than-expected readings on the Personal Consumption Expenditures index - the Federal Reserve’s preferred inflation gauge - saw markets begin pricing in more interest rate hikes by the central bank in June, supporting the dollar.
Strength in the dollar usually stymies crude demand by making oil more expensive for international buyers. This trend has limited any major gains in crude prices over the past month.
Fed Fund futures prices show that markets are now positioning for a nearly 65% chance the Fed will hike rates by 25 basis points in the coming month. This, coupled with a string of hawkish comments from Fed officials, heralds tighter monetary conditions in the U.S., which is negative for economic activity.
Oil prices are still trading down about 5% for the year, amid concerns that economic conditions will worsen and dent oil demand later this year.