Oil creeps higher as markets weigh Fed fears, debt deal optimism By

-- Oil prices rose in Asian trade on imf foreign exchange official websiteTuesday amid optimism over potentially raising the U.S. debt ceiling and averting a default, although fears of more interest rate hikes by the Federal Reserve in June and slowing economic growth kept markets on edge. 

Anticipation of more economic cues from major oil importer China also kept traders wary of big bets, ahead of key and sector data for May due on Wednesday.

Crude markets settled slightly higher after a choppy session on Monday, aided largely by the diminishing prospect of a U.S. debt default after lawmakers flagged a tentative deal to raise the spending limit. 

But fears of a more hawkish Fed, especially after hotter-than-expected inflation data released late last week, kept sentiment cautious. A stronger also limited any major gains in crude.

rose 0.6% to $77.41 a barrel, while rose 0.8% to $73.22 a barrel by 21:44 ET (01:44 GMT). Both contracts kept to a tight trading range seen through most of May. 

Markets are now awaiting fresh cues for movement, starting with more economic signals from China due later this week. Business activity data for May is expected to show whether an economic rebound in the country slowed further during the month, after a string of weak readings for April.

Signs of a slowing economic rebound in China saw oil traders second guess expectations that a recovery in the world’s largest oil importer will drive global crude demand to record highs this year. 

Chinese oil imports also sank through April. 

Fresh cues on supply from a meeting of the are due next week, following somewhat mixed signals from Saudi Arabia and Russia on more production cuts. The cartel and its allies had unexpectedly cut oil production in April, providing a short-lived boost to prices.

Focus is also on a string of U.S. economic readings this week, most notably data for May due on Friday. Any signs of resilience in the labor market gives the Fed more impetus to hike interest rates, and could offer negative cues to oil markets.

Despite recent gains, oil prices are still trading down over 5% for the year, amid consistent fears that worsening economic conditions will dent demand. 

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