Oil prices declined Monday as a partial U.S. government shutdown entered a second week and a possible default on government debt approached.
Benchmark crude for November delivery fell 51 cents to $103.33 a barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contact rose 53 cents to close at $103.84 on the Nymex on Friday.
The U.S. was forced to curtail government operations last week after a politically divided Congress failed to approve a short-term funding measure to allow the nation to pay its bills past the end of its fiscal year on Sept. 30. As a result, 800,000 federal workers were furloughed and scores of nonessential services were halted.
Now, Congress faces another deadline that could prove highly damaging to the U.S. economy if missed. The nation's debt ceiling, also known as its borrowing limit, must legally be raised before Oct. 17. The U.S. Treasury estimates it will have $30 billion of cash on hand on that day, but the money will be exhausted quickly - government bills can run as high as $60 billion on a single day.
Moreover, the government could default on its obligations to service its debt - which could lead to the first-ever default on government debt.
The shutdown lowers oil prices, since energy would be needed less in a prolonged halt to government activities. Analysts say oil traders tend to stay on the sidelines in times of uncertainty.
"Oil is considered a sort of a risk asset," said Evan Lucas, market strategist at IG in Melbourne, Australia.
Brent, the benchmark for international crudes, fell 35 cents to $109.11 on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
- Wholesale gasoline fell 0.9 cent to $2.5985 per gallon.
- Natural gas rose 1.9 cents to $3.525 per 1,000 cubic feet.
- Heating oil fell 0.1 cent at $2.9978 per gallon.