Crude Falls as U.S. Lawmakers Fail to Agree on Debt Limit

West Texas Intermediate crude fell as U.S. lawmakers have yet to agree on raising the nation’s debt limit, bolstering concern of a potential default that may slow economic growth and reduce fuel demand.

Futures slid as much as 0.9 percent after Senate leaders wrapped up almost four hours of debate without resolution as the government’s borrowing authority is due to lapse in three days. A partial U.S. government shutdown began on Oct. 1. Net crude imports from China, the biggest oil-consuming country after the U.S., rose to a record 25.61 million metric tons last month, customs data released on Oct. 12 showed.

“We’ve been moving lower to sideways since the shutdown and this will continue through the debt-ceiling negotiations,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “There’s well-warranted caution in the market because of the risk of default, which would have terrible economic consequences. We touched $100.60 Friday, the lowest level since July, which is now our target.”

WTI crude for November delivery dropped 64 cents, or 0.6 percent, to $101.38 at 9:10 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 3.5 percent above the 100-day average.

Brent oil for November settlement fell $1.03, or 0.9 percent, to $110.25 a barrel on the London-based ICE Futures Europe exchange. Volume was 27 percent lower than the 100-day average. The European benchmark crude traded at a $8.87 premium to WTI, narrowing for the first time in six sessions.

Economic Threat

The congressional deadlock over the debt ceiling is threatening the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said on NBC’s “Meet the Press” program. The U.S. accounted for 21 percent of global petroleum consumption last year, according to BP Plc (BP/)’s Statistical Review of World Energy.

Oil prices are unable to profit for the threat of U.S. insolvency continues to hang over the markets like the sword of Damocles,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

Oil traders are losing a key weekly report on supplies because of the U.S. government shutdown, threatening to reduce market volume and boost volatility. The Energy Information Administration ceased operations and furloughed staff, stopping publications such as the 34-year-old Weekly Petroleum Status Report on Wednesdays, which includes crude and gasoline data. The Commodity Futures Trading Commission has also suspended its Commitments of Traders reports on Fridays.

API Report

The EIA suspension means the market will turn to commercial reports from organizations such as the American Petroleum Institute, an industry-funded group that gives paying subscribers first access to the information.

“We are trading in an information vacuum with the lack of the CFTC and Energy Department reports,” Armstrong said.

China’s net crude imports are equivalent to an average 6.26 million barrels a day, 25 percent more than in August and 2 percent higher than the previous record of 6.13 million barrels a day in July, data compiled by Bloomberg show.

The premium for the earliest deliveries of crude from Cushing, Oklahoma, the biggest oil storage hub in the U.S., is declining after averaging a record during the third quarter as refineries shut for maintenance and the nation boosts output.

The gap between front-month WTI and contracts for delivery a year later was $6.90 a barrel Oct. 11, after averaging $11.70 in the third quarter, as concern eased that tanks at Cushing, the delivery point for WTI, would drop to minimum levels and limit the amount of oil available for delivery right away.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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