SINGAPORE, May 22 Reuters Oil prices were steady on Monday as caution relating to U.S. debt ceiling talks dragged on optimism over demand later in the year and offset support from lower supplies from Canada and OPEC producers.

Brent crude futures rose 13 cents, or 0.2, to 75.71 a barrel by 0850 GMT, while U.S. West Texas Intermediate WTI crude for July delivery, the more actively traded contract, rose 12, or 0.20, to 71.81.

The June WTI contract , which expires later on Monday, fell 10 cents to 71.45 a barrel.

Talks to avert a default on U.S. debt were set to resume in Washington on Monday, as the prospect of a default and resulting possible economic downturn and cooling of fuel demand continued to spook markets.

Still, the International Energy Agency IEA warned of a looming shortage in the second half when demand is expected to eclipse supply by almost 2 million barrels per day bpd, the Parisbased agency said in its latest monthly report.

I expect plenty of volatility in the coming days and a bounce upward in crude prices as and when a deal is reached to raise the debt ceiling, said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Last week, both oil benchmarks gained about 2, their first weekly gain in five, after wildfires shut in large amounts of crude supply in Alberta, Canada.

The impact of voluntary production cuts by the Organization of the Petroleum Exporting Countries OPEC and its allies including Russia, known as OPEC, is also being…