West Texas Intermediate declined amid lower-than-average trading volumes as part of the U.S. government closed over a budget stalemate that threatens to slow the economy and reduce oil demand.
Futures dropped as much as 0.7 percent after a 4.9 percent loss last month. A midnight deadline in Washington passed after lawmakers failed to approve a funding bill. No further negotiations were immediately planned and both sides still disagree over raising the nation’s debt ceiling to avoid a first-ever default after Oct. 17. A U.S. Energy Information Administration report tomorrow may show crude stockpiles rose for a second week in the world’s largest oil consuming nation, according to a Bloomberg survey.
“Now the guesswork about the duration of the shutdown is beginning because the longer it takes, the more the U.S. economic growth in the fourth quarter will suffer,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone. “At the moment, the main focus is trying to establish the floor in the market.”
WTI for November delivery fell as much as 73 cents to $101.60 a barrel in electronic trading on the New York Mercantile Exchange, and was at $101.75 at 1:50 p.m. London time. WTI decreased 0.5 percent yesterday to the lowest close since July 3. The volume of all futures traded was about 40 percent below the 100-day average. Prices increased 6 percent last quarter.
Brent for November settlement was 70 cents lower at $107.67 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $5.92 to WTI, compared with $6.04 yesterday.
A shutdown may cut fourth-quarter U.S. growth as much as 1.4 percentage points, economists said. The nation is expected to account for 21 percent of global oil consumption this year, according to the International Energy Agency.
The U.S. Treasury Department has said its ability to borrow will end on about Oct. 17 unless the $16.7 trillion debt ceiling is increased. The U.S. won’t have enough money to pay all of its bills at some point from Oct. 22 to Oct. 31 without action by Congress, according to the Congressional Budget Office.
“The debt-ceiling issue remains an obstacle to any significant upside potential,” said Mark Keenan, a director of commodities research and strategy at Societe Generale SA in Singapore.
OPEC isn’t in trouble from light, tight oil supply sources and the marginal cost for producing tight oil is “too much” if crude prices are at $90 a barrel, OPEC Secretary-General Abdalla el-Badri said at Oil & Money conference in London. Current oil prices are acceptable, and will be at about $107 a barrel at the end of the year, he said.
Libya is currently producing 700,000 barrels a day and restoring output is a “political” issue, not a technical one, Libyan Oil Minister Abdulbari Al-Arusi, said at the same conference. The country, a member of the Organization of Petroleum Exporting Countries, pumped about 1.4 million barrels a day in March, according to data compiled by Bloomberg.
U.S. crude inventories probably rose 2.5 million barrels last week, according to the median estimate of eight analysts in the Bloomberg News survey before government data tomorrow.
Gasoline stockpiles are projected to decline by 700,000 barrels while distillate supplies, a category that includes heating oil and diesel, are forecast to drop 1.38 million barrels, according to the survey. The EIA is the Energy Department’s statistical arm.
The industry-funded American Petroleum Institute is scheduled to release separate inventory data today. The API collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA. It will release its weekly report tomorrow as normally scheduled even with the government shutdown, according to an e-mailed statement.
WTI has retreated since reaching a two-year high of $112.24 on Aug. 28 amid concern that a U.S.-led assault on Syria for its alleged use of chemical weapons would spread unrest through the region and disrupt Middle East supplies. Syria borders Iraq, which according to a monthly Bloomberg survey is the second-biggest crude producer in OPEC.
To contact the editor responsible for this story: Stephen Voss at email@example.com