Tags: Oil Prices

Oil below $97 as US Debt Limit Deadline Nears

Friday, 29 Jul 2011 06:45 AM

 

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SINGAPORE (AP) — Oil prices fell below $97 a barrel Friday in Asia as U.S. leaders failed to agree to lift the government debt limit just days from a deadline, leaving investors to mull worst-case scenarios if a default occurs.

Benchmark oil for September delivery was down 62 cents to $96.82 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. Crude rose 4 cents to settle at $97.44 on Thursday.

In London, Brent crude rose 10 cents to $117.46 per barrel on the ICE Futures exchange.

Investors are closely watching negotiations among U.S. lawmakers ahead of Aug. 2, when the government will run out of money to pay its obligations unless its $14.3 trillion debt limit is raised.

Most analysts say a U.S. debt default is still very unlikely, but if it happened would devastate the economy. Credit Suisse said Thursday a default would likely trigger a 5 percent contraction of U.S. gross domestic product.

Crude has traded near $97 for the last few days as investors wait for an outcome of the debt limit talks.

"Crude prices are generally in a holding pattern ahead of further guidance regarding the debt ceiling agreement or lack thereof," energy consultant Ritterbusch and Associates said. "A difficult trading environment still lies ahead until the U.S. debt situation acquires some clarity."

Investors will also be eyeing U.S. GDP growth for the second quarter which is scheduled to be announced later Friday.

Some analysts expect that once the U.S. debt issue is settled, investors will focus on strong crude demand in developing countries, particularly China, and push oil prices higher by the end of the year.

"Hard though it may be to see through the currently negative headlines, there is the potential for a positive economic outcome, particularly for oil," J.P. Morgan said in a report. "The removal of policy uncertainty offers a constructive sign for the fourth quarter."

In other Nymex trading in September contracts, heating oil fell 1.3 cents to $3.10 a gallon while gasoline skidded 0.4 cents to $3.06 a gallon. Natural gas futures dropped 3.6 cents to $4.21 per 1,000 cubic feet.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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