Oil fell in the Asian trade today on concerns over a possible US default if the President, Mr Barack Obama, and lawmakers fail to reach a deal to raise the country’s debt ceiling, analysts said.
New York’s main contract, West Texas Intermediate light sweet crude for September delivery, sank $1.08 to $98.79 a barrel, and Brent North Sea crude — also for September delivery — dropped 60 cents to $118.07.
“The uncertainty over the US debt saga has created concerns for the oil market,” said Mr Victor Shum, an analyst with energy consultancy Purvin and Gertz.
The White House and top lawmakers scrambled yesterday for a deal to stop the world’s richest country from an unthinkable and ruinous default on its debt, which would affect the rest of the world.
Mr Obama, his Democratic allies and Republican foes gave little sign of progress towards a compromise to raise the $14.3-trillion limit on borrowing by the US Government, which will run out of cash to pay its bills on August 2.
“We still have a week to go — there will be more political theatre before the deadline,” said Mr Shum.
“So we will likely see a lot of volatility in equities and oil futures this week,” he said.
All sides agree that cash-strapped Washington must close its yawning budget deficit, but they disagree on the size and blend of spending cuts and revenue increases, as well as on how and whether to slice into the social safety net.