Oil prices fell on Friday after Republicans in the US House of Representatives and President Joe Biden's administration halted talks on raising the government's debt ceiling, threatening a default that could lower energy demand.
However, despite these declines, Brent crude and US NYMEX crude are heading to record their first weekly gains in a month.
There is not much time for Biden and House Republicans to agree on a deal to raise the federal government's $31.4 trillion borrowing limit, or risk a catastrophic default.
The US Treasury Department has warned that the government may not be able to pay all its bills by June 1.
But a White House official said an agreement was still possible. On the other hand, the markets were worried, due to the statements of Federal Reserve Chairman Jerome Powell, who said that the bank will not need to raise interest rates to the high levels that it previously aimed to reach to fight inflation.
Mizuho analyst Robert Yager said, It doesn't look like they're going to get the debt deal today, the chances of a 25 basis point rate hike at the June meeting are increasing day by day, there's not much time to reach an agreement.
After reports of stalled debt ceiling negotiations and Powell's comments, US stocks, Treasury yields and the dollar fell.
The US Treasury said in a statement that it provided some support to the markets, and US Treasury Secretary Janet Yellen reaffirmed the strength and soundness of the country's banking system in a meeting with the CEOs of banks, Thursday.
Analysts from the National Australia Bank said the possibility of an interest rate hike increases concerns about weak demand in the United States.
Analysts said prices could rise as they expect Chinese demand to continue to increase throughout 2023, which should offset a slowdown in OECD demand.
Data this week showed that the productivity of Chinese oil refineries in April rose 18.9 percent from a year earlier, to the second highest level ever.
Chinese refiners have maintained high levels to meet domestic fuel demand and build stocks ahead of the summer travel season.
