LONDON: Brent oil slid below $108 a barrel yesterday on worries that a shutdown of the US government will crimp demand, while easing tensions in US-Iran nuclear talks boosted prospects for an increase in supply.
The US government began a partial shutdown yesterday for the first time in 17 years, potentially putting up to one million workers on unpaid leave, closing national parks and stalling medical research projects.
But analysts expect that a swift resolution will limit the downside in oil prices.
“The US government shutdown has affected all markets, including crude, but it’s a slow burner in terms of overall impact,” said Simon Wardell of IHS.
Brent crude fell 64 cents to $107.73 a barrel by 1352 GMT. US crude slid 63 cents to $101.70.
“We’re in a lockdown situation, but I don’t suspect it’s going to last too long,” said Rob Montefusco of Sucden Financial.
But Brent could fall to $105 by the end of the week if Republicans and Democrats can’t break their political stalemate over a new government bill, Montefusco said.
Oil has come under downward pressure in the past month as supply has improved, with Libya increasing output and tensions easing over Syria.
In China, weaker-than-expected growth in the manufacturing sector in September added to concerns that a nascent recovery in the world’s second-largest economy might be foundering.
Signs of a thaw in relations between the United States and Iran also weighed on oil prices.
US President Barack Obama and new Iranian President Hassan Rouhani spoke by telephone last week in the highest level contact between the countries in more than three decades, fuelling hopes for a resolution of Iran’s decade-old nuclear standoff with the West.