NEW YORK: Crude oil prices on both sides of the Atlantic rose yesterday as geopolitical risk crept back into the markets, even as the dollar index turned positive after a phone call between US President Barack Obama and U S House Speaker John Boehner over the ongoing budget crisis.
President Obama told Republican Boehner yesterday he would be willing to negotiate with Republicans once the US government is re-opened and the threat of a default is lifted, the White House said.
Analyst Jim Ritterbusch described the budget crisis as “somewhat of a two-edged sword” for oil prices, in a research note. He said the budget crisis has weakened the US currency, making oil more attractive for holders of other currencies, while also raising the possibility of a steep sell-off in oil.
“We’re getting the decoupling between the dollar and oil, and probably some of the short that had been established in light of the shutdown have been taken off the table,” said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.
“We got down to the bottom of the $102 to $109 range and we may be getting some bottom-feeders in there.”
US.crude has traded largely between $102 and $109 since early July. Political clashes in Egypt and the capture by US forces of a senior Al Qaeda figure in Libya over the weekend raised the spectre of supply disruptions in a region that pumps a third of the world’s oil. “It’s going to make a lot of sense for (Al Qaeda) to strike at oil infrastructure” in Libya, said John Kilduff, partner at Again Capital LLC in New York.
Upward pressure on Brent was expected to ease as the supply of North Sea crude that underpins the benchmark is set to reach a 2013 high in November, according to loading programs.
“Oil is still doing surprisingly well, given the ongoing budget crisis in the US, the approach of the debt ceiling and mounting supplies,” said a Commerzbank research note.
Brent rose 71 cents to $110.39 a barrel by 1.26pm (1726 GMT), after earlier posting gains of over $1. US oil rose 75 cents to $103.78, after earlier gaining over $1.
Markets were concerned that the US government shutdown would cut demand and hurt consumer confidence.