West Texas Intermediate traded near a three-month low amid speculation about a gain in oil inventories and concern that the U.S. government’s first shutdown in 17 years will slow economic growth and demand for crude.
Futures dropped as much as 0.6 percent, poised for the lowest close in three months. The U.S., the world’s biggest oil user, began halting some official operations because of a budget stalemate yesterday. Crude stockpiles climbed by 4.55 million barrels last week, the industry-funded American Petroleum Institute said, while data from the Energy Information Administration today may show supplies gained 2.5 million barrels, according to a Bloomberg News survey.
“Oil prices are certainly getting caught in the U.S. political crossfire,” said Nic Brown, head of commodities research at Natixis SA in London. “Until the budget and debt ceiling is sorted, I would expect more price volatility.” Also, “we are now at the point where refiners are going into maintenance, switching from summer to winter slates, so we would expect to see a drop in demand for crude,” he said.
WTI for November delivery dropped as much as 61 cents to $101.43 a barrel in electronic trading on the New York Mercantile Exchange. It was at $102.07 as of 1:49 p.m. London time. The contract yesterday slid 0.3 percent to $102.04, the lowest close since July 3. The volume of all futures traded was about 54 percent below the 100-day average.
Brent for November settlement rose by 31 cents to $108.25 a barrel after falling as much as 50 cents, or 0.5 percent, to $107.44 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $6.20 to WTI, compared with $5.90 yesterday.
The U.S. Congress failed to pass a budget for the fiscal year that began yesterday, causing a partial closure of government services and forcing about 800,000 federal workers off the job. Separately, the country began final extraordinary measures to avoid breaching its debt limit, and its ability to borrow will end Oct. 17, Treasury Secretary Jacob J. Lew said.
A partial shutdown of the U.S. government lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists surveyed by Bloomberg, with the costs accelerating if the closure persists. The nation accounted for 21 percent of global oil demand last year, according to BP Plc’s Statistical Review of World Energy.
U.S. gasoline supplies rose by 3.26 million barrels last week, the API said. The EIA report today may show inventories declined by 700,000 barrels, according to the median estimate of 12 analysts in the Bloomberg survey.
Distillate stockpiles, a category that includes heating oil and diesel, shrank by 1.57 million barrels, the API said. They are projected to decline by 1 million in the government report, according to the survey. The EIA is the Energy Department’s statistical arm.
Refinery utilization rates are forecast to drop to about 89.3 percent from 90.3 percent the prior week, the survey showed. Operations had been above 90 percent since Aug. 16. The rate reached 92.8 percent on July 12, the highest level since July 2012.
The API in Washington 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 for its weekly survey.