Oil prices down on US debt ceiling concerns

AP FILE PHOTO

SINGAPORE – Oil prices edged lower in Asian trade Monday on growing concerns the US budget crisis could spiral into a devastating debt default and ravage the global economy.

New York’s main contract, West Texas Intermediate for delivery in November fell 57 cents to $103.27 in mid-morning trade, while Brent North Sea crude for November eased 40 cents to $109.06.

The US government shutdown looks set to drag into day seventh on Monday, as a series of marathon talks between Democrats and Republicans in Washington failed to reach a resolution to the stand-off.

US Treasury Secretary Jack Lew warned Sunday that Congress was “playing with fire” as Republicans raised the threat of a US default if President Barack Obama refuses to negotiate on spending.

Lew said the United States will run out of its ability to borrow money on October 17, and with only $30 billion in hand to meet obligations that can run to $60 billion a day, it will quickly default.

Fears are growing that the shutdown could threaten a fragile economic recovery in the US, with some analysts suggesting it could push the country’s economy back into recession.

“Both sides have become more entrenched in their positions, implying that any agreement on raising the debt ceiling required by October 17 also looks out of reach,” French bank Credit Agricole said in a note to investors.

“Markets are set to become increasingly nervous over coming days suggesting an increase in risk aversion,” it added.

Eyes are also on the US Federal Reserve, which on Wednesday will release minutes from its September policy meeting.

The minutes will be pored over for clues about the future of its vast stimulus program, which has been credited with fuelling a global equities rally for most of the year.