Oil below US$103 as US debt deadline nears

By Pamela Sampson, AP

BANGKOK–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 US$1.06 to US$102.78 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contact rose 53 cents to close at US$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.

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 US$30 billion of cash on hand on that day, but the money will be exhausted quickly — government bills can run as high as US$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.

Brent, the benchmark for international crudes, fell US$1.13 to US$108.33 on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

— Wholesale gasoline fell 2.4 cents to US$2.5839 per gallon.

— Natural gas rose 3.2 cents to US$3.538 per 1,000 cubic feet.

— Heating oil fell 2.1 cents at US$2.9776 per gallon.