Oil prices fall amid US debt concerns and prospect of increased supply

Pound, gold and oil prices in focus: commodity and currency check, 22 May

Thu, May 22, 2025, 3:48 AM 4 min read

Oil (BZ=F, CL=F)

Oil prices fell in early European trading on Thursday morning, on the prospect of an increase in supply from major oil producing countries, amid lingering concerns about demand.

Brent crude futures (BZ=F) declined 1.4% to $64.01 a barrel, while West Texas Intermediate futures (CL=F) were down 1.5% at $60.68 a barrel.

The fall in oil prices came after Bloomberg reported that members of the Organization of the Petroleum Exporting Countries and their allies — known as OPEC+ — were discussing making a third consecutive increase in output, with a decision set to be made at the group's meeting on 1 June.

According to the report, one of the options in discussion was an output hike of 411,000 barrels a day for July, which would be triple the amount initially planned.

A spokesperson for OPEC had not responded to Yahoo Finance UK's request for comment at the time of writing.

Oil prices are trading at their lowest levels since 2021, as US president Donald Trump's trade war has prompted fears of a global economic slowdown, with concerns that this could weigh on demand for fuel.

In addition, fears about growth in US debt appeared to have taken hold across financial markets on Thursday. This comes as a large tax-cut and spending bill from the Trump administration goes through US Congress, while weak demand for an auction of US debt added to concerns.

"Oil prices have dropped back as concerns about the US debt pile added another layer of wariness about the outlook for the global economy and energy demand," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"This is colliding with expectations that OPEC+ members may opt for another large production increase, increasing the amount of crude washing around world markets. Traders already had an eye on the extra supplies around given that there was a larger than forecast increase in US crude stockpiles last week."

Pound (GBPUSD=X, GBPEUR=X)

The pound was little changed against the dollar (GBPUSD=X) on Thursday morning, trading at $1.342 at the time of writing, despite concerns over the rising levels of government debt and borrowing.

Data released by the Office for National Statistics (ONS) on Thursday morning showed that UK government borrowing came in at £20.2bn in April, which was up £1bn from the same month last year.

This was also higher than the consensus forecast of £17.9bn, according to Capital Economics.

Public sector net debt, excluding public sector banks, was estimated to be 95.5% of the UK's gross domestic product (GDP) at the end of April and remained at the highest level since the early 1960s.

Danni Hewson, head of financial analysis at AJ Bell, said: "It’s not the start to the year the chancellor would have wished for. Despite the impact of her budget changes to employers national insurance kicking in and boosting Treasury coffers by almost £2bn, April’s numbers suggest there is still much more to do."

"The government hoped it could grow its way out of the situation it inherited, and the economy has been faring better than many had expected," she said. "But with inflation rising and geopolitics fractious, everyone will be wondering how good the chancellor is at keeping her balance."

In the US, meanwhile, there is set to be a vote on what Trump has called his "big, beautiful bill" on its passage through the House of Representatives later today.

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There are concerns that the tax cuts and spending proposed in the bill will add to the US debt pile. The Congressional Budget Office said in analysis on Tuesday that the proposals could add $3.8tn to the US federal deficit over the next decade.

In addition, an auction of 20-year US government bonds, known as Treasurys, saw weak demand on Wednesday, signalling investor unease about growing US debt.

"The growing mountain of US debt is causing ripples of worry across financial markets, with signs investors are baulking at financing the Trump administration," said Streeter. "These concerns have hit sentiment in Europe, given the repercussions that financial difficulties in the world’s largest economy would have on the global economy."

In other currency moves, the pound was up 0.2% against the euro (GBPEUR=X), trading at €1.1856 at the time of writing.

Gold (GC=F)

Gold prices were flat on Thursday morning, as investors weighed uncertainty in the global economy and geopolitics.

Gold futures (GC=F) was trading at $3,312.30 per ounce at the time of writing, while the spot gold price dipped 0.1% to $3,310.28 per ounce.

In addition to concerns about mounting US debt, geopolitical tensions also remained in focus for investors.

CNN reported on Tuesday that, according to several US intelligence officers, Israel was making preparations to strike Iranian nuclear facilities, which comes as the Trump administration has looked to make a deal with Tehran.

In broader market movements, the FTSE 100 (^FTSE) was down 0.7% on Thursday morning at 8,716.49 at the time of writing. For more details, check our live coverage here.

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