Oil fell, headed for the first weekly decline in five, on concern a failure to reach a deal on raising the U.S. debt limit may cause the nation to default, threatening the economy of the world’s biggest crude consumer.
Futures slipped as much as 0.6 percent after House Speaker John Boehner delayed a planned vote on debt-limit legislation as Senate leaders stood ready to kill the measure should it get to their chamber. Prices also dropped before a report forecast to show the world’s largest economy grew at the slowest pace in a year. U.S. crude stockpiles rose for the first time in eight weeks last week, Energy Department data showed July 27.
“All eyes are focused on the U.S. debt,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil in New York will average $100 a barrel this year. “We did see a build in inventories. If it becomes more of a trend rather than a one-off, that’s a worry.”
Crude for September delivery fell as much as 55 cents to $96.92 a barrel in electronic trading on the New York Mercantile Exchange. It was at $97.05 at 3:15 p.m. Singapore time. Yesterday, the contract rose 4 cents to $97.44. Prices are down 2.9 percent this week and 1.7 percent higher the past month.
Brent oil for September settlement on the London-based ICE Futures Europe exchange was at $117.46 a barrel, up 10 cents. The European benchmark contract was at a premium of $20.45 a barrel to New York futures, compared with a record close of $22.63 on July 14.
Crude in New York is extending losses as prices slide below the 50-day moving average, according to data compiled by Bloomberg. Front-month futures have settled for more than a week above this indicator, at $97.33 today. A breach of technical support usually means prices will continue to fall.
The U.S. House won’t vote on Speaker Boehner’s debt-limit plan, Representative Kevin McCarthy, the majority whip, or vote-counter, said yesterday in Washington. Boehner’s plan failed to gain enough backing from his own Republican Party members.
Senate Democrats are working to break the impasse over raising the debt limit by devising a strict enforcement mechanism to guarantee future deficit savings, according to Democratic officials.
Negotiators were working to find a solution both sides could accept. Should the House pass Boehner’s bill, it faces a veto threat from President Barack Obama and a promise by Senate Majority Leader Harry Reid of defeat in that chamber.
U.S. gross domestic product grew 1.8 percent in the second quarter, compared with 1.9 percent in the prior three months, based on the median forecast of economists surveyed by Bloomberg News. The Commerce Department report is due today.
Tropical Storm Don
Oil is headed for the first monthly gain in three as the first storms of the Atlantic hurricane season form, shutting some production facilities.
Tropical Storm Don temporarily “jogged westward” and is expected to resume a course across the Gulf of Mexico tonight that has forced some oil and gas rigs to shut down, according to a U.S. National Hurricane Center bulletin issued before 11 p.m. East Coast time yesterday. The system is 370 miles (600 kilometers) southeast of Corpus Christi, packing maximum winds of 50 miles per hour. It is forecast to go ashore near Corpus Christi as a tropical storm late tomorrow or early July 30.
Gulf of Mexico
About 6.8 percent of oil production and 2.8 percent of natural-gas output from the Gulf of Mexico has been shut because of Don, said the Bureau of Ocean Energy Management, Regulation and Enforcement.
Anadarko Petroleum Corp. has evacuated all employees and halted production at six of its facilities in the western Gulf of Mexico, according to an update on its website.
U.S. crude stockpiles climbed 2.3 million barrels to 354 million in the week ended July 22, an Energy Department report showed on July 27. A 2 million-barrel drop was forecast in a Bloomberg News survey.
Crude may decline next week, a Bloomberg News survey showed. Thirteen of 32 respondents, or 41 percent, forecast oil will decrease through Aug. 5. Analysts were split last week, with 41 percent looking for a gain and 41 percent projecting a fall.