Oil prices edge lower on fears of US debt default

Published: 14th October 2013 09:07 AM  |   Last Updated: 14th October 2013 09:07 AM   |  A+A-


Oil prices edged lower in Asian trade today as the United States faces a potentially devastating sovereign debt default after senators failed to end a budget impasse.

New York's main contract, West Texas Intermediate for delivery in November was down 26 cents to USD 101.76 in mid-morning trade, while Brent North Sea crude for November eased 20 cents to USD 111.08.

Investors are keeping a close eye on the US Senate as it tries to work out a deal to reopen the federal government and raise the country's borrowing limit before a October 17 deadline.

The government shut down on October 1, a move that has since damaged domestic confidence and undermined America's reputation as the world's leading economic superpower.

Harry Reid, the Democratic Leader in the Senate, painted an optimistic picture of a dialogue with Republicans -- represented by top Senator Mitch McConnell -- though nothing concrete was disclosed.

"I've had a productive conversation with the Republican leader this afternoon, our discussions were substantive, and we'll continue those discussions," Reid said. "I'm optimistic about the prospect for a positive conclusion."

Failure to lift the debt limit by this Thursday would mean the government is unable to pay its bills or service its debts, as it only has USD 30 billion in hand to meet obligations that can run to USD 60 billion a day.

"With only three days to go before the US tips over the soft deadline of its debt ceiling, progress on Capitol Hill seemed to come to a standstill," Desmond Chua, market analyst at CMC Markets in Singapore, said in a note.

"The ball is now thrown back into the Senate's court, with market watchers hoping that less conservative Republicans in the Senate will support a longer debt limit extension with no conditions attached," Chua added.


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