Oil prices were lower Monday amid jitters as a battle loomed in Washington among U.S. political leader over a federal budget needed to avoid a partial shutdown of the government.
Benchmark oil for November delivery fell $1.32 to $101.55 per barrel at early afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to close at $102.87 a barrel on the Nymex on Friday.
The U.S. government will reach its borrowing limit, or debt ceiling, on Tuesday. If Congress doesn't raise that limit, the government won't be able to pay all its bills and some 800,000 of the 2.1 million federal employees will not go to work.
A lasting solution seems far off as the White House and Republican lawmakers still disagree sharply on spending cuts and other key budget issues.
“The economy will slow down, confidence will slide and demand for crude will be hurt. There will be a real snowball effect if the partial shutdown goes ahead,” said Evan Lucas, analyst with IG in Melbourne.
Goldman Sachs estimated that a three-week shutdown would slow the economy's annual growth rate in the October-December quarter by up to 0.9 percentage point. If so, the growth rate next quarter would be a scant 1.6 percent, compared with market expectations of a 2.5 percent growth.
Oil has already fallen for three straight weeks as diplomatic efforts surrounding Syria and Iran eased concerns about Middle East supplies.
Brent crude, the benchmark for international crudes used by many U.S. refineries, fell 87 cents to $107.76 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
- Wholesale gasoline fell 2.2 cents to $2.638 per gallon.
- Natural gas fell 3.3 cents to $3.556 per 1,000 cubic feet.
- Heating oil lost 1.8 cents to $2.9671 per gallon
- Oil falls on higher supplies, Iran diplomacy
- Brent oil slips on Libya output rise, easing Syria fears
- Brent oil slips below $110 as Syria tension eases
- Oil falls after U.S.-Russia deal on Syria weapons
- Syria fears send U.S. oil to two-year-high settlement
- U.S. consults oil experts as it weighs action against Syria