*
Crude benchmarks closes at lowest in a week
*
U.S. dollar index hits more than one-week high
*
Yellen warns US default would threaten global economy
*
OPEC: Chinese growth to be offset by economic risks
elsewhere
(Adds latest prices)
By Scott DiSavino
NEW YORK, May 11 (Reuters) - Oil prices fell about 2% to
a one-week low on Thursday as a political standoff over the U.S.
debt ceiling stoked recession jitters in the world's biggest oil
consumer, while rising U.S. jobless claims and weak Chinese
economic data weighed.
Brent crude futures fell $1.43, or 1.9%, to settle
at $74.98 a barrel, while West Texas Intermediate crude (WTI) fell $1.69, or 2.3%, to settle at $70.87.
Those were the lowest closes for both benchmarks since May
4.
The dollar rose to its highest since May 1 against a
basket of major currencies, after recent U.S. jobless claims
data strengthened the case for the Federal Reserve to halt
interest rate hikes but did not prompt expectations of year-end
rate cuts.
A stronger greenback makes oil more expensive in other
countries. Higher interest rates can weigh on oil demand by
boosting borrowing costs, pressuring economic growth.
U.S. Treasury Secretary Janet Yellen urged Congress to raise
the $31.4 trillion federal debt limit and avert an unprecedented
default that would trigger a global economic downturn.
"Uncertainties regarding the U.S. debt ceiling, recent
banking issues that could prompt a credit crunch across much of
the oil industry and continued strong possibility of a recession
remain ... significant obstacles" for oil markets, analysts at
energy consulting firm Ritterbusch and Associates said in a
note.
Keeping pressure on oil prices, the U.S. Dow and S&P 500
stock indexes fell after California-based bank
PacWest Bancorp's latest woes sparked another rout in
the regional banking sector.
An extended period of high interest rates could put more
stress on banks, but would be necessary if inflation stays
stubbornly high, said Minneapolis Federal Reserve President Neel
Kashkari.
U.S. producer prices rose moderately last month, the
smallest annual producer inflation increase in more than two
years.
In other U.S. news, President Joe Biden's administration
unveiled a sweeping plan to slash greenhouse gas emissions from
the power industry, one of the biggest steps so far in its
effort to decarbonize the economy to fight climate change.
New Chinese bank loans tumbled far more sharply than
expected in April, adding to worries that the economy's
post-pandemic recovery is losing steam.
"Oil prices are lower after another round of Chinese data,
this time money metrics, confirmed their economic reopening from
COVID continues to disappoint," said Edward Moya, senior market
analyst at data and analytics firm OANDA.
The oil market largely ignored the Organization of the
Petroleum Exporting Countries (OPEC) global oil demand forecast
for 2023, which projected demand in China, the world's biggest
oil importer, would increase.
OPEC projected Chinese oil demand would rise by 800,000
barrels per day (bpd), up from its 760,000-bpd forecast last
month.
OPEC, however, said that increase in Chinese demand could be
offset by economic risks elsewhere, including the U.S. debt
ceiling battle.
On the supply front, Iraq has sent an official request to
Turkey to restart oil exports through a pipeline running from
the semi-autonomous Kurdistan Region in northern Iraq to the
Turkish port of Ceyhan, which could add 450,000 bpd to global
crude flows.
(Additional reporting by Shadia Nasralla in London and Jeslyn
Lerh in Singapore; Editing by Marguerita Choy, David Gregorio
and Cynthia Osterman)
