Oil falls as debt deal remains elusive – Reuters
Pumps are seen at a gas station in Tokyo June 24, 2011.
Credit: Reuters/Kim Kyung-Hoon
NEW YORK | Mon Jul 25, 2011 4:41pm EDT
NEW YORK (Reuters) – Oil prices fell on Monday as the inability of Congress to reach agreement on raising the government debt limit kept investors wary of risky assets and concerned about the global economy.
Low trading volumes boosted volatility. Brokers and analysts expected some market participants to be sidelined awaiting the outcome of U.S. efforts to avoid default.
Concerns about a potential U.S. credit rating downgrade or even default kept markets worried about the global economy and energy demand, after a new bailout deal for Greece helped boost U.S. crude prices to a six-week high on Friday.
Brent September crude fell 73 cents to settle at $117.94 a barrel, having traded from $116.92 to $118.45.
U.S. September crude fell 67 cents to settle at $99.20 a barrel, recovering from an earlier low of $98.52.
Total crude trading volumes were well below 30-day averages, with Brent crude nearly 50 percent under and U.S. volumes more than 40 percent under with less than an hour of post-settlement trading remaining.
Oil prices bounced off early lows, staying within sight of last week’s highs, and some analysts maintained that chances of a U.S. default remained remote and were unlikely to translate into a real economic crisis.
“The political circus over the U.S. debt level will probably last until the last hours before August 2,” Olivier Jakob of Petromatrix said in a note.
“There are enough demand uncertainties to maintain speculators on the sideline of the oil trade,” he concluded.
A sharply divided U.S. Congress pursued rival budget plans that appeared unlikely to win broad support as the clock ticks toward an August 2 deadline to raise the debt limit. Talks again collapsed in acrimony over the weekend.
U.S. stocks dipped on the sparring in Washington over the U.S. debt ceiling and gold prices hit a record high reacting to the political stalemate. .N
EURO ZONE DEBT WOES
The euro zone’s debt problems also kept concerns about economic growth in focus. Moody’s cut Greece’s credit rating further into junk territory and said it was almost certain to slap a default tag on its debt as a result of a new European Union rescue package.
Euro zone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal for Greece.
The euro recovered to move higher against the dollar, also in volatile trading, as investors debated the effectiveness of the Greek bailout plan.
Both the euro and the dollar felt pressure early because of the lack of detail on the plan for Greece and as a deal on the U.S. debt ceiling remained elusive. The dollar fell to a record low against the Swiss franc and a four-month trough versus the yen.
A weaker dollar, along with shut-in production in war-torn Libya and reduced output in the North Sea, helped limit oil price losses, according to traders and analysts.
U.S. crude stocks fell last week, while products stockpiles rose, a Reuters survey of analysts on Monday showed. The American Petroleum Institute’s weekly report is due on Tuesday, with the government’s report following on Wednesday morning.
(Additional reporting by Gene Ramos in New York, Jessica Donati in London and Florence Tan in Singapore; Editing by David Gregorio)
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retired_sandman wrote:
Oh my god! Oil slipping $1… Floods, locusts, the death of the first born… What’s next?!
kritik1 wrote:
Seems like investing in gold is going to pay off.
ad3 wrote:
This is great news. I hope oil drops below $100/barrel.
The title of this news makes this appear as if it is bad that Oil price has dropped below $118 / barrel. IT IS GOOD. IT IS GOOD. IT IS GREAT THAT PRICE HAS DROPPED.
I hope this keeps going down and stays below $100 all the time.