WTI bears stay in charge as price corrects to below $72.00

West Texas Intermediate crude oil is corecting and down by some 0.9% and has fallen from a high $72.83 to a low of $71.47. Oil sank despite an upbeat tone on Wall Street over the prospects of debt-ceiling negotiations that continue in Washington ending in a solution. 

On Wednesday, President Joe Biden and McCarthy reiterated their aim to strike a deal soon to raise the $31.4 trillion federal debt ceiling and agreed to talk as soon as Sunday. President Joe Biden on Wednesday said he was confident of reaching a deal to avoid defaulting on US debt.

The debt ceiling has drawn attention away from uncertainty about the Federal Reserve's stance on interest rates, but economic data showed the number of Americans filing new claims for jobless benefits fell more than expected last week, suggesting the labor market remains tight, giving the Fed more cushion to continue raising rates.  In the week ended 13 May, Initial Claims fell 22k to 242k. That was 4k below the same week in April and points to another strong labour market report. ´´The current strength of the labour market does not support the Federal Reserve view that unemployment rate will lift to 4.5% by year-end,´´ analysts at ANZ Bank explained. 

Meanwhile, Dallas Federal Reserve Bank President Lorie Logan and Fed Governor Philip Jefferson said on Thursday the economy does not appear to be softening fast enough for the central bank to pause its rate hike cycle.

Elsewhere, the US also reported inventories unexpectedly rose last week, with the Energy Information Administration reported a five-million barrel rise in stocks, while most analysts expected a drop. Wednesday's EIA report showed that (1) U.S. crude oil inventories as of May 12 were -0.1% below the seasonal 5-year average, (2) gasoline inventories were -6.4% below the seasonal 5-year average, and (3) distillate inventories were -16.4% below the 5-year seasonal average. US crude oil production in the week ended May 12 fell -0.8% w/w to 12.2 million bpd, only 0.9 million bpd (-6.9%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported last Friday that active US oil rigs in the week ended May 12 fell by -2 to an 11-month low of 586 rigs, falling further below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.