Oil headed for its first weekly advance in more than a month on optimism that the U.S. will reach an agreement to raise its debt ceiling and avert a catastrophic default.

West Texas Intermediate futures climbed above US$72 a barrel, bringing this week's gain to about three per cent. House Speaker Kevin McCarthy said negotiators may reach an agreement in principle as soon as this weekend. Asian refiners are snapping up U.S. oil cargoes again, and forecasters continue to predict global crude markets will tighten this summer. 

Crude is still down 10 per cent this year as China's lackluster economic recovery and monetary tightening by the Federal Reserve weigh on the outlook. Fed officials injected some uncertainty into the market this week, sounding increasingly split on whether to raise interest rates at their meeting next month or pause.

“Oil has really failed to turn around and get stronger” this year, Francisco Blanch, head of commodities research at Bank of America Corp. told Bloomberg television. But “we think we're going to have a deficit” in supplies and “throughout the second half of the year we'll start to see prices heading higher.”

Wildfires continued to rage in Alberta, Canada's top energy-producing province, disrupting output and adding some tightness to the market. Rystad Energy estimates that about 240,000 barrels a day has been shut due to the blazes.

Prices:

• WTI for June delivery rose 0.5 per cent to US$72.19 a barrel at 9:57 a.m. in London.
• Brent for July settlement gained 0.5 per cent to US$76.24 a barrel.