Crude Oil Falls, Heads for Weekly Decline, on U.S. Debt Ceiling Dispute
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 extended losses after data from the Commerce Department showed the world’s largest economy grew 1.3 percent in the second quarter, less than analysts predicted. U.S. crude stockpiles rose for the first time in two months last week, Energy Department data showed July 27. 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.
“The U.S. debt talk resembles a train wreck,” Thorbjoern Bak Jensen, an analyst at Global Risk Management, said by phone from Middelfart, Denmark. “Oil is still awaiting the debt ceiling outcome.”
Crude for September delivery fell as much as $1.22 to $97.39 a barrel in electronic trading on the New York Mercantile Exchange. It was at $96.33 a barrel at 1:33 p.m. London time. Prices are down 3.6 percent this week and 0.9 percent higher this month.
Brent for September settlement on the London-based ICE Futures Europe exchange was at $116.54 a barrel, down 82 cents. The European benchmark contract was at a premium of $20.31 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 may experience “some strengthening” before making landfall on the Texas coast later today, the National Hurricane Center said.
Don is about 255 miles (410 kilometers) southeast of Corpus Christi with maximum winds of 50 miles per hour, according to a National Hurricane Center bulletin issued at 7 a.m. Central Daylight Time today. The system is forecast to go ashore near Corpus Christi as a tropical storm later today or early tomorrow, the center said.
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.
“We did see a build in inventories,” 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. “If it becomes more of a trend rather than a one-off, that’s a worry.”
Crude may drop 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.
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