07 October 2013, News Wires – Brent futures edged down towards $109 per barrel on Monday as oil production resumed in the Gulf of Mexico after a tropical storm, while lingering concerns over the US government shutdown clouded the outlook for demand.
Tropical Storm Karen, which prompted producers to shut in nearly two-thirds of oil output in the Gulf of Mexico, was downgraded to a tropical depression late on Saturday, with production starting to return to normal by the end of the weekend.
Brent crude had eased 33 cents to $109.11 per barrel early on Monday, after settling higher in the previous three sessions and gaining 0.8% last week to end a three-week losing run. US crude traded 50 cents lower at $103.34 per barrel, after ending last week up 0.9%.
“There are no bullish or bearish factors to drive the market in either direction until we hear significant news out of the US,” Reuters quoted Newedge commodity sales manager Yusuke Seta as saying in Tokyo.
“Most oil traders are lost in the market. They are just waiting and see how the oil market will react.”
He was referring to the nearly week-long US budget impasse and mounting concern it could undermine moves to increase the country’s borrowing limit by a 17 October deadline, raising the possibility of a sovereign bond default.
Republican House Speaker John Boehner vowed on Sunday not to raise the US debt ceiling without a “serious conversation” about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a US default.
“We still believe the US congress will come to an agreement before 17 October,” said Seta. According to Newedge, Brent prices are unlikely to slip below $107.50 per barrel or above $112 per barrel.
A weakening greenback helped limit losses as it makes it cheaper for importers to buy dollar-priced oil using their own currency. The dollar eased 0.1% against a basket of major currencies, within striking distance of an eight-month trough hit last week.
Liquidity may return to Asia from Tuesday when Chinese markets reopen after a week-long holiday, Reuters said, although there is no major data ahead until the weekend when China publishes trade numbers.
Elsewhere, BP, Marathon Oil, and Chevron were returning workers to offshore facilities in the Gulf of Mexico by helicopter after earlier evacuations, while other companies were also working to restore operations. The Gulf accounts for about 1.3 million barrels per day – nearly one-fifth of US oil output.