IV:Crude oil futures tumble to 3-month low on U.S., China concerns
Investing.com - Crude oil futures fell to a three-month low on Monday, as growing worries over a looming U.S. government shutdown coupled with concerns over China’s economic strength weighed on appetite for growth-linked assets.
On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD101.65 a barrel during European morning trade, down 1.2%.
New York-traded oil futures fell by as much as 1.35% earlier in the session to hit a daily low of USD101.47 a barrel, the weakest level since July 5.
The November contract settled down 0.15% at USD102.87 a barrel on Friday.
Oil futures were likely to find near-term support at USD100.90 a barrel, the low from July 5 and resistance at USD103.77 a barrel, the high from September 27.
Political wrangling in Washington over funding for President Barack Obama’s healthcare law continued over the weekend, fuelling fears over the prospect for a U.S. government shutdown.
Congress must pass a short-term budget by midnight on Monday in order to keep the government open.
Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.
Meanwhile, in China, data released earlier in the day showed that China’s HSBC manufacturing index was revised down to 50.2 from an initial reading of 51.2 this month, indicating that the recovery in the world’s second largest economy remains fragile.
Economists had expected an unchanged reading.
Market sentiment was also hit amid renewed concerns over political instability in Italy.
The euro came under pressure after Silvio Berlusconi announced Saturday that he was pulling his ministers out of Prime Minister Enrico Letta’s coalition government and called for fresh elections to be held.
Meanwhile, fears over a disruption to supplies from the Middle East continued to fade away after the U.S. and Russia agreed Friday on a draft U.N. Security Council resolution aimed at eliminating chemical weapons in Syria.
Futures surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Syria for its alleged use of chemical weapons against civilians.
But prices have since lost nearly 7% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons on September 14.
While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.
Thawing tensions between the U.S. and Iran also added to the selling pressure. The two countries began talks last week to resolve their ongoing standoff over Tehran's nuclear program.
Countries in the Middle East were responsible for nearly 35% of global oil production in 2012.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery dropped 0.95% to trade at USD107.64 a barrel, with the spread between the Brent and crude contracts standing at USD5.99 a barrel.
