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Debt Ceiling Agreement Pushes Crude Oil Prices Higher

Crude oil futures were up on Monday, recouping steep losses from the previous session as fears over a possible U.S. default eased after the White House announced an agreement to raise the U.S. debt ceiling had been reached.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September traded at USD97.12 a barrel during European morning trade, jumping 1.2%.       

It earlier rose as much as 1.65% to trade at USD97.53 a barrel, the highest price since July 28.

Late on Sunday, President Barack Obama announced a deal between Republicans and Democrats to cut spending and raise the USD14.3 trillion debt ceiling, easing worries about a possible sovereign debt default.

Under the framework deal, which was to be voted on in later in the day, the debt ceiling will be raised by at least USD2.1 trillion, sufficient to serve the government’s needs into 2013.

“There are still some very important votes to be taken by Congress, but I want to announce the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” President Obama said.

Meanwhile, the U.S. National Hurricane Center said on Sunday that Tropical Storm Eugene could strengthen to become a hurricane within the next 48 hours, as it headed west-northwest over open water in the Gulf of Mexico.

Last week, Tropical Storm Don, which made landfall along the south Texas coast on Saturday, prompted major oil companies, such as Royal Dutch Shell and BP to evacuate workers from production platforms in the Gulf.

Energy traders track tropical storm activity in the event it disrupts production in the Gulf of Mexico, which is home to 29% of U.S. oil production.

Crude prices sank nearly 2% to hit a two-week low on Friday as disappointing data on second quarter U.S. gross domestic product and uncertainty over a deal to raise the U.S. debt ceiling underlined concerns over the short-term demand outlook from the world’s largest oil consumer. 

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery surged 1.95% to trade at USD119.05 a barrel, up USD21.93 on its U.S. counterpart.

By. ForexPros.com

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