Oil prices edge lower on fears of US debt default
SINGAPORE – Oil prices edged lower in Asian trade Monday as the United States faces a potentially devastating sovereign debt default after senators failed to end a budget impasse.
New York’s main contract, West Texas Intermediate for delivery in November was down 26 cents to $101.76 in mid-morning trade, while Brent North Sea crude for November eased 20 cents to $111.08.
Investors are keeping a close eye on the US Senate as it tries to work out a deal to reopen the federal government and raise the country’s borrowing limit before a October 17 deadline.
The government shut down on October 1, a move that has since damaged domestic confidence and undermined America’s reputation as the world’s leading economic superpower.
Harry Reid, the Democratic Leader in the Senate, painted an optimistic picture of a dialogue on Sunday with Republicans – represented by top Senator Mitch McConnell – though nothing concrete was disclosed.
“I’ve had a productive conversation with the Republican leader this afternoon, our discussions were substantive, and we’ll continue those discussions,” Reid said. “I’m optimistic about the prospect for a positive conclusion.”
Article continues after this advertisementFailure to lift the debt limit by this Thursday would mean the government is unable to pay its bills or service its debts, as it only has $30 billion in hand to meet obligations that can run to $60 billion a day.
Article continues after this advertisement“With only three days to go before the US tips over the soft deadline of its debt ceiling, progress on Capitol Hill seemed to come to a standstill,” Desmond Chua, market analyst at CMC Markets in Singapore, said in a note.
“The ball is now thrown back into the Senate’s court, with market watchers hoping that less conservative Republicans in the Senate will support a longer debt limit extension with no conditions attached,” Chua added.