Oil slumps 5pc to five-week low amid US debt default fears

NEW YORK: Oil prices sank about 5% to a five-week low on Tuesday on concerns about the economy as US politicians discuss ways to avoid a debt default and investors prepare for more rate hikes this week.

Brent futures fell $3.99, or 5.0%, to settle at $75.32 a barrel, while West Texas Intermediate crude (WTI) fell $4.00, or 5.3%, to end at $71.66.

That was the lowest close for both benchmarks since March 24 and was also their biggest one-day percentage declines since early January. Oil prices and Wall Street’s main indexes both fell after US Treasury Secretary Janet Yellen said the government could run out of money within a month.

The White House said President Joe Biden would not negotiate over the debt ceiling during his meeting with four top congressional leaders on May 9, but he will discuss starting “a separate budget process.”

US job openings fell for a third straight month in March and layoffs increased to the highest level in more than two years, suggesting some softening in the labor market that could aid the Federal Reserve’s fight against inflation. “The US economy continues to evolve in a manner consistent with a recession commencing later this year,” analysts at Barclays, a bank, said in a note.