Oil prices reversed course to fall on Friday after U.S. House Republicans and President Joe Biden’s administration paused talks about raising the government’s debt ceiling, threatening a default that could cut energy demand.

Brent crude futures settled 28 cents, or 0.8%, lower at $75.58 a barrel, while West Texas Intermediate (UTI) U.S. crude for July expiry fell 25 cents, or 0.3%, to $71.69.

Due to expiration on Monday, the less active U.S. crude contract for May closed down 31 cents, or 0.4%, to $71.55. Brent and U.S. crude nonetheless notched their first weekly gains in a month, with both benchmarks rising about 2%.

Biden and House Republicans have little time to agree on a deal to raise the federal government’s $31.4 trillion borrowing limit or risk a catastrophic default. The Treasury Department has warned that the government could not pay all its bills by June 1.

A White House official said a deal remained possible.

Markets were also spooked by Federal Reserve Chair Jerome Powell’s comments that inflation was ‘far above’ the Fed’s objective, adding no decisions had been made yet on the next interest rate action.

“It doesn’t look they are going to get the debt deal done today… the chance of a 25 basis point (rate) increase in the June meeting is rising by the day… There’s not a lot for the bulls to hang their hats on,” said Mizuho analyst Robert Yawger.

Following reports of the paused debt ceiling negotiations and Powell’s comments, U.S. stocks, Treasury yields, and the dollar all moved lower.

Providing some support for markets, U.S. Treasury Secretary Janet Yellen reaffirmed the strength and soundness of the country’s banking system in a meeting with bank CEOs on Thursday, the Treasury Department said in a statement.

U.S. oil rig count, an indicator of future production, fell by 11 to 575 this week, the biggest weekly drop since September 2021, energy services firm Baker Hughes Co (BKR.O) said.

While the potential for additional rate hikes increases concern about demand weakness in the United States, prices could rise on higher Chinese demand throughout 2023, said analysts from National Australia Bank.

China’s oil refinery throughput in April rose 18.9% from a year earlier to the second-highest level on record, data showed this week.

Chinese refiners maintained high runs to meet recovering domestic fuel demand and build stockpiles ahead of the summer travel season.