Oil prices rebounded on Friday after losing more than 1% the previous day as investors shifted to cautious optimism that the risk of US debt default would decrease.
Brent futures rose $1.15 or 1.5% to $77.01 a barrel as of 1205 GMT, while West Texas Intermediate (WTI) crude for July maturity rose $1.16 or 1.6% to $73.10 per barrel.
The less active WTI crude oil contract for May, which expires on Monday, rose $1.09 to $72.95.
Markets have been pricing out the risks of a U.S. debt default, which some dip-buying in Brent crude from previous oversold conditions.
Earlier this week, US President Joe Biden and Speaker of the House of Representatives Kevin McCarthy reiterated their goal of reaching a deal to raise the $31.4 trillion federal debt ceiling and agreed to meet.
Traders are reluctant to go into the weekend short, in case the US government reaches an agreement to raise the debt ceiling.
The mood remains mixed as global central banks grapple with inflation data that will warrant further rate hikes and investors are unclear about the optimism over avoidance of a U.S. debt default.
According to some Fed policymakers, US inflation does not seem to be cooling down fast enough to allow the Fed to halt its rate hike campaign. Analysts say that the potential for additional rate hikes raises concerns about demand weakness in the US.
However, analysts said there has been a rise in prices as they expect Chinese demand to continue to improve throughout 2023, and this should offset the slowdown in OECD demand.
In April, China’s oil refinery output rose 18.9% from a year ago to the second-highest in history, according to data released earlier this week. Chinese refineries continue their high-capacity production to meet the recovering domestic fuel demand and stock up before the summer travel season.