Could 11 (Reuters) – Oil costs fell about 2% to a one-week low on Thursday as a political standoff over the U.S. debt ceiling stoked recession jitters on the earth’s greatest oil client, whereas rising U.S. jobless claims and weak Chinese language financial knowledge weighed.

Brent crude futures fell $1.43, or 1.9%, to settle at $74.98 a barrel, whereas West Texas Intermediate crude (WTI) fell $1.69, or 2.3%, to settle at $70.87.

These had been the bottom closes for each benchmarks since Could 4.

The greenback knowledge strengthened the case for the Federal Reserve to halt rate of interest hikes however didn’t immediate expectations of year-end charge cuts.

A stronger dollar makes oil costlier in different international locations. Greater rates of interest can weigh on oil demand by boosting borrowing prices, pressuring financial progress.

U.S. Treasury Secretary Janet Yellen urged Congress to boost the $31.4 trillion federal debt limit and avert an unprecedented default that will set off a world financial downturn.

“Uncertainties concerning the U.S. debt ceiling, current banking points that might immediate a credit score crunch throughout a lot of the oil trade and continued sturdy risk of a recession stay … vital obstacles” for oil markets, analysts at vitality consulting agency Ritterbusch and Associates stated in a notice.

Conserving stress on oil costs, the U.S. Dow and S&P 500 inventory indexes (.DJI), (.SPX) fell after California-based financial institution PacWest Bancorp‘s (PACW.O) newest woes sparked one other rout within the regional banking sector.

An extended period of excessive rates of interest may put extra stress on banks, however could be crucial if inflation stays stubbornly excessive, stated Minneapolis Federal Reserve President Neel Kashkari.

U.S. producer prices rose reasonably final month, the smallest annual producer inflation enhance in additional than two years.

In different U.S. information, President Joe Biden’s administration unveiled a sweeping plan to slash greenhouse gas emissions from the facility trade, one of many greatest steps to this point in its effort to decarbonize the financial system to combat local weather change.

New Chinese bank loans tumbled much more sharply than anticipated in April, including to worries that the financial system’s post-pandemic restoration is shedding steam.

“Oil costs are decrease after one other spherical of Chinese language knowledge, this time cash metrics, confirmed their financial reopening from COVID continues to disappoint,” stated Edward Moya, senior market analyst at knowledge and analytics agency OANDA.

The oil market largely ignored the Organization of the Petroleum Exporting Countries (OPEC) world oil demand forecast for 2023, which projected demand in China, the world’s greatest oil importer, would enhance.

OPEC projected Chinese language oil demand would rise by 800,000 barrels per day (bpd), up from its 760,000-bpd forecast final month.

OPEC, nevertheless, stated that enhance in Chinese language demand could possibly be offset by financial dangers elsewhere, together with the U.S. debt ceiling battle.

On the provision entrance, Iraq has despatched an official request to Turkey to restart oil exports by way of a pipeline operating from the semi-autonomous Kurdistan Area in northern Iraq to the Turkish port of Ceyhan, which may add 450,000 bpd to world crude flows.

Reporting by Laura Sanicola; Modifying by Christopher Cushing

Our Requirements: The Thomson Reuters Trust Principles.