By Virginia Harrison, MarketWatch
SYDNEY(MarketWatch) — Crude-oil futures slipped in electronic trading Friday, as U.S. debt concerns weighed on investors, stoking uncertainty about energy demand.
Crude for September delivery CL1U -0.50% lost 47 cents, or 0.5%, to $96.97 a barrel on the New York Mercantile Exchange during Asian trading hours.
The losses erased crude’s mild gains notched during the North American session, after improving jobs and housing data brightened the economic outlook and prospects for oil demand.
But sentiment remained clouded by the impasse in the U.S. debt-ceiling debate, as the House of Representatives cancelled a Thursday night vote on the Republican plan to raise the nation’s debt limit. Read more about the U.S. debt-ceiling debate.
The U.S. government must legislate to raise the debt ceiling before Aug. 2., or risk triggering a default.
Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said investors are “marking time” ahead of a decision on the debt-ceiling.
He said a successful vote to raise the debt limit is likely to send oil prices higher in the short term.
“There will be euphoric buying because everything is out of the way, equity markets go up, and if equity markets go up, commodity markets will fly up. Until someone starts to realize that it’s actually a negative, because they’re not solving their issues,” Barratt said.
He said any bout of relief buying will overshadow the impact that U.S. government spending cuts — part of the agreement required to increase the debt-ceiling — will have on the outlook for crude.
“When the government pulls the plug, like when the Federal Reserve pulled the plug on the [monetary stimulus] spending, then that should create a marker … that says the use for oil is not going to as much as it should be,” he said.
Cyclone watch
Tropical Cyclone Don strengthened in its path toward the Texas coast early Friday, according to the National Hurricane Center (NHC).
The storm was forecast to hit land by Friday night or Saturday morning local time, the NHC said.
Virginia Harrison is a MarketWatch reporter based in Sydney.
