MI:Oil slips under US$111 as US fiscal worries weigh
LONDON, Nov 30 — Brent crude oil fell below US$111 (RN337) a barrel today as a lack of progress in US budget talks to avert a fiscal crisis darkened the outlook for demand in the world’s biggest oil consumer.
Top US Republican lawmaker John Boehner said yesterday talks to avert US$600 billion worth of tax hikes and spending cuts, the so-called “fiscal cliff” due to start in the new year, had made no substantive progress.
Economists fear the US economy could plunge into recession if a crisis cannot be averted, putting the world economy at risk and slamming the breaks on global energy demand.
Worries over the US budget crisis have kept oil under pressure this month, overwhelming rises spurred by tension in the Middle East. Brent has trimmed early gains and is now on track to end November up 1.5 per cent.
Brent dropped 10 cents to US$110.66 by 1040 GMT. US crude was down 10 cents at US$87.97 a barrel.
“No significant progress seems to have been made in the US budgetary dispute, which has led to profit-taking, especially since oil is trading at the upper end of its trading corridor,” said Commerzbank oil analyst Carsten Fritsch.
“If the fiscal cliff can be avoided, prices should increase, but Brent is still likely to stay within its current range, between US$108 and US$115 per barrel,” Fritsch added.
Oil demand
US GDP growth in July-Sept was revised up to 2.7 per cent from an initial reading of 2.0 per cent as restocking by businesses provided a big boost, but consumer and business spending were revised lower.
“We are looking at more downward revisions for global oil demand in 2013, and the market is generally oversupplied,” said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates.
Global oil production has been running ahead of demand throughout 2012, resulting in rising inventories that act as a substantial cushion for unexpected supply shocks and keep a lid on prices.
A Reuters survey suggests the 12-member Organization of the Petroleum Exporting Countries is still producing over a million barrels per day (bpd) more than its target of 30 million bpd.
However, support for oil prices continues to come from the political crisis in Egypt and Western sanctions on Iran.
An Islamist-led assembly was expected to finalise a new Egyptian constitution today aimed at ending a political crisis that erupted when President Mohamed Mursi gave himself sweeping new powers last week.
Analysts say turmoil in Egypt is unlikely to affect Middle East oil exports, but the market is unwilling to dismiss completely the risk to supplies from a region that is responsible for a third of world oil production. — Reuters
