Oil prices were trading steady on May 22 as caution relating to US debt ceiling talks dragged on optimism over oil demand later in 2023. This phenomenon is likely to offset by support from lower supplies from Canada and OPEC+ producers. Discussions to avert a default on the US debt were set to resume in Washington, as the prospect of a default and resulting possible economic downturn and cooling of fuel demand continued to impact investor sentiment.

Brent crude futures rose 13 cents, or 0.2 per cent, to $75.71 a barrel, while US West Texas Intermediate (WTI) crude for July delivery, the more actively traded contract, rose 12, or 0.20 per cent, to $71.81. The June WTI contract , which expires later on Monday, fell 10 cents to $71.45 a barrel. Last week, both oil benchmarks gained about 2 per cent, their first weekly gain in five, after wildfires shut in large amounts of crude supply in Alberta, Canada.

The International Energy Agency (IEA) has warned of a looming shortage in the second half when demand is expected to eclipse supply by almost 2 million barrels per day (bpd), the Paris-based agency said in its latest monthly report.

Where are oil prices headed?

The impact of the voluntary oil production cuts announced by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, will be felt after going into effect this month.

Financial services firm JP Morgan said that the total exports of crude and oil products from the group plunged by 1.7 million barrels per day (bpd) by May 16, adding that Russian oil exports will likely fall by late May. 

“I expect plenty of volatility in the coming days and a bounce upward in crude prices as and when a deal is reached to raise the debt ceiling,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Meanwhile on May 20, the Group of Seven (G7) nations pledged at its annual leaders’ meeting to enhance efforts to counter Russia’s evasion of the price caps on its oil and fuel exports “while avoiding spillover effects and maintaining global energy supply”.

IEA Executive Director Fatih Birol told news agency Reuters that those moves are not expected to change the supply situation for crude and oil products on the sidelines of the G7 summit.

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