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Oil prices slipped in Asian trade today as investors fretted about the impact on oil demand as lawmakers in Washington look unlikely to reach an early agreement to end the US Government shutdown.
New York’s main contract, West Texas Intermediate (WTI) for delivery in November, fell 41 cents to $103.69 in mid-morning trade, while Brent North Sea crude for November eased 27 cents to $108.92.
WTI jumped $2.06 in New York trade yesterday on news about the near completion of a key US Gulf Coast pipeline, but the upbeat sentiment over increased supply was short-lived. Brent rose $1.25 in London trade.
“Markets are closely following developments in the US as the federal government shutdown enters its third day. A continuation of shutdown will dampen prices,” said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at consultancy firm EY.
Talks between an exasperated President Barack Obama and top Republicans yesterday failed to break the impasse, with both sides accusing the other of refusing to negotiate.
The breakdown ensures the world’s largest economy heads into a third day of government spending freeze today, raising fears that the gridlock will continue into the middle of the month and trigger a catastrophic debt default.
Joyce Liu, investment analyst at Phillip Futures in Singapore, said investor gloom over the increasing likelihood of an extended US government shutdown was exacerbated by a lacklustre US jobs report.
Payrolls firm ADP had yesterday said the US private sector added 166,000 jobs in September, below what analysts had expected and too low to meaningfully reduce the jobless rate.
“The worse-than-expectations increase in ADP employment, together with the about 800,000 furlough due to government shutdown, do not paint an optimistic future for the US labour market,” Liu said.
Prices were also pressured after the US Department of Energy reported that supplies increased by 5.5 million barrels last week, far higher than expectations of a 2.1 million barrel rise, indicating weaker demand.
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