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Oil falls as relief over US debt deal fades
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The price of oil nearly fell below US$100 a barrel for the first time in more than three months yesterday as relief faded over a US deal to avoid a default on its debts.
US benchmark crude for November delivery slid as low as US$100.03 before recovering a bit to close with a loss of US$1.62, or 1.6 percent, to US$100.67 a barrel on the New York Mercantile Exchange. Oil last traded below US$100 a barrel on July 3.
Oil gained more than US$1 a day earlier, driven by optimism over the eleventh-hour deal reached by leaders in Congress to reopen the government through Jan. 15 and increase the US borrowing authority through Feb. 7. The rally lost momentum, however, as investors assessed the impact of the 16-day partial shutdown of the government on the economy and worried that the deal only postpones the debt problem.
"More important for oil markets, S&P estimates that the closure of the government will result in a 0.6% reduction in Q4 GDP growth," wrote Addison Armstrong, senior director of market research at Tradition Energy, in a note to clients.
Also helping to push prices lower, meanwhile, was the improvement in negotiations on Iran's nuclear program between the Islamic Republic and six world powers. The two sides agreed to meet again in Geneva in early November.
Iran's oil exports have dropped substantially over the past years because of US-led economic sanctions, one of the reasons usually cited by analysts for rising oil prices.
Elsewhere, with the regular supply report from the Energy Department postponed this week, traders looked to a report from the industry-funded American Petroleum Institute instead. The API said that US stocks of crude oil rose by 5.9 million barrels last week, about twice the build expected by analysts.
In other markets, Brent crude's December contract, the benchmark used to set prices for international crudes, dropped US$1.20, or 1.1 percent, to US$109.39 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline dropped 5 cents to US$2.65 a gallon.
— Natural gas fell 1 cent to US$3.76 per 1,000 cubic feet.
— Heating oil fell 5 cents to US$2.99 a gallon.
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