01 October 2013, News Wires – Brent crude edged below $108 per barrel on Tuesday to trade near a seven-week low on the prospect of a US government shutdown that could crimp oil demand, while investors also eyed easing tensions in US-Iran nuclear talks.
A partisan deadlock in the US Congress over Republican efforts to halt President Barack Obama’s healthcare reforms threatened to shut the government down if the politicians cannot agree on a spending bill by midnight on Monday.
“The shutdown of the government would result in the decrease in demand for oil in the world’s top oil consumer, pressuring prices, as hundreds of thousands of government employees would be forced to stay home without any pay,” Reuters cited Phillips Futures head of investment, Teoh Say Hwa, as saying in a note.
Brent crude for November fell 38 cents to $107.99 per barrel by Tuesday morning. US crude was at $101.95, down 38 cents.
Oil prices have come under downward pressure in the past month as supply has improved, with Libya ramping up output while tensions over Syria and Iran eased.
“A lot of bull factors have been removed from the market,” Newedge Japan commodity sales manager Ken Hasegawa told Reuters.
“I can’t find any bullish factors for oil.”
Technical charts showed that US crude futures may fall to $100 after breaking a support level of $102, Hasegawa said, adding that the next support level for Brent is at $105.85.
In China, weaker-than-expected growth in the manufacturing sector in September added to concerns that the nascent recovery at the world’s second largest economy may be foundering.
Signs of a thawing in relations between the US and Iran also weighed on oil prices.
Obama and new Iranian President Hassan Rouhani spoke by telephone last week in the highest-level contact between the countries in more than three decades, fuelling hopes for a resolution of Iran’s decade-old nuclear standoff with the West.
The world’s six major powers will meet Iranian officials in Geneva on 15 and 16 October to discuss Iran’s nuclear programme.
Investors are also looking ahead to US oil inventories data on Wednesday. The US Energy Information Administration said it has enough resources to operate approximately through 11 October in the event of a government shutdown.
US commercial crude oil inventories were forecast to have risen last week, while gasoline stockpiles were seen to be lower, a preliminary Reuters poll of five analysts showed.