Reuters reported that oil futures dropped below USD 118 per barrel after a breakdown of budget talks in the US Congress over the weekend helped drive investors away from volatile and risky assets.
Worries about a US credit rating downgrade or even default dampened hope for stronger global economic growth after a new bailout deal for Greece helped propel Brent to a high of USD 118.80 per barrel.
Mr Christophe Barret global analyst at Credit Agricole Corporate & Investment Bank said that “After all the excitement on the economic front last week, attention will return to the fundamentals, particularly US weekly data.”
Brent crude for September was 80 cents lower at USD 117.87 per barrel at 0940 GMT after falling by more that USD 1 earlier in the session. US oil was 57 cents lower at USD 99.30 paring losses of more than USD 1 but off a six week high of USD 99.87.
With oil prices only marginally off last week’s highs, some analysts maintained that worries about a US default remained remote and were unlikely to translate into a real economic crisis.
Mr Olivier Jakob of Petromatrix said that “The political circus over the US debt level will probably last until the last hours before August 2nd 2011. There are enough demand uncertainties to maintain speculators on the sideline of the oil trade.”
