Oil held steady as traders waited to see if U.S. lawmakers would approve a tentative deal to avert a catastrophic default.

West Texas Intermediate futures remained above US$72 a barrel after gaining 1.2 per cent on Friday. President Joe Biden and House Speaker Kevin McCarthy voiced confidence that their agreement will pass Congress and be signed into law, avoiding a default that would threaten a financial collapse. Treasury Secretary Janet Yellen has said the debt limit must be extended by June 5 to avoid default, giving lawmakers until next week to act on the deal. Liquidity is thin so far in trading on Monday, with the U.S. and U.K. observing national holidays.

The agreement “reduces the risk of a significant crash,” but “the outcome was pretty much priced in,” Bart Melek, global head of commodity strategy at TD Securities, said by phone. The agreement calls for reduced spending, making it “flat to modestly negative for demand.” 

Oil is 10 per cent lower this year as China’s lackluster economic recovery and the Federal Reserve’s aggressive monetary tightening weighed on the demand outlook. Russian supply has also been resilient, even after the nation said it would cut output, while domestic crude processing has dropped.

Prices:

• WTI for July delivery slipped 16 cents to US$72.51 a barrel at 11:26 a.m. in New York.
• There will be no settlement Monday due to the US Memorial Day holiday, and trades will be booked on Tuesday.
• Brent for July settlement declined 37 cents to US$76.58 a barrel.