Oil prices rose on Monday due to optimism that the US government shutdown could soon come to an end, potentially boosting demand in the world’s largest oil consumer. This optimism offset concerns about rising global supplies. Brent crude futures increased by 45 cents, or 0.71%, to $64.08 a barrel, while US West Texas Intermediate crude rose 48 cents, or 0.80%, to $60.23 a barrel.
The uptick in oil prices follows a decline of about 2% last week, which marked the second weekly decline due to fears of a supply glut. The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed to slightly increase output in December but paused further hikes in the first quarter, citing concerns about a potential supply glut.
The potential end to the US government shutdown, which has been ongoing for a record-breaking 40 days, also lifted equities on Monday. Reports suggested that lawmakers had reached a deal to fund operations through January, which would restore funding for essential services, including food stamps, and reverse the firing of thousands of federal workers. US President Donald Trump stated that “it looks like we’re getting close to the shutdown ending,” fueling hopes for a resolution.
The shutdown has had significant economic implications, with the Congressional Budget Office estimating that it could shave 1.5 percentage points off quarterly GDP growth by mid-November. The reopening of the government would allow officials to resume releasing key economic data, including labor market reports, which are crucial for the Federal Reserve’s consideration of interest rate cuts.
Asian markets responded positively to the news, with Tokyo, Hong Kong, Shanghai, and Seoul experiencing gains, although Singapore and Wellington saw losses. The possibility of an end to the shutdown has also boosted expectations of a potential interest rate cut, with markets currently pricing in a 67% chance of a December rate cut.
While sentiment has been dented by concerns about overvalued stocks and doubts over artificial intelligence investments, the prospect of a resolution to the US government shutdown has provided a much-needed boost to markets. As the situation continues to unfold, investors will be closely watching for further developments and their potential impact on the global economy.
