The debt ceiling bill proposed after talks between President Biden and House Speaker Kevin McCarthy cleared the first hurdle, with the House of Representatives giving it broad bipartisan support.
With 314 votes for and117 against, the supporters of raising the U.S. debt ceiling further still are in the clear majority. The next hurdle to be cleared is the Senate.
Should the bill pass there, too, the U.S. federal government will once again narrowly avoid defaulting on its debt and the prospects of oil demand growth in the world's largest consumer will improve.
Oil prices were down when the news of the debt ceiling bill broke, largely on the back of an unexpected build in U.S. crude oil and fuel inventories, as estimated by the American Petroleum Institute.
The API reported a crude oil inventory increase of over 5 million barrels for the week to May 26, while analysts expected a draw of some 1.2 million barrels. It also estimated inventory builds in gasoline and middle distillates, of almost 2 million barrels each.
Yet the news of the debt ceiling bill passing in the House has added upward pressure to oil prices, at least for a short while. At the time of writing, WTI has climbed to $68.41 and Brent Crude is back above $73.
The drama around that debt ceiling is one of the factors that has been driving prices lower in the last couple of weeks, as a debt default would lead to an economic crisis certain to decimate demand for crude.
Now that the prospects of such a crisis dim amid bipartisan support for the bill, oil prices will likely get some support ahead of OPEC+'s next meeting.
Per the proposed deal, the U.S. debt ceiling will be suspended for two years, with some caps on federal spending and recycling of unused Covid funds. Hardliners in the GOP had insisted on more spending cuts while Democratic hardliners had insisted on no spending cuts at all.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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