LONDON--Crude prices traded lower Thursday, capping a 2% rally in the previous session, as uncertainty over the U.S. budget weighs on oil markets.
The November contract on the New York Mercantile Exchange was down 38 cents, or 0.4%, at $103.72 a barrel. The November Brent on London's ICE futures exchange was up 1 cent at $109.19 a barrel.
Nymex oil futures rose 2% Wednesday after TransCanada Corp. TRP.T -0.02% said the southern leg of its Keystone XL pipeline is nearly complete. The pipeline expansion will allow U.S. crudes to flow more freely to the key Gulf Coast refining region, where they will compete directly with higher-priced imports such as Brent.
The threat of a sustained U.S. government shutdown is still keeping a lid on crude prices, as is a rise in U.S. crude inventory levels, reported by the Energy Information Administration on Wednesday.
Crude prices could rise in the coming weeks as oil demand picks up and refining margins improve, said Amrita Sen, an analyst at Energy Aspects.
"What's been positive for Brent is this pickup in product prices," she said. "And as soon as margins start improving, there's going to be more crude demand."
Supply issues are still a problem: even though production from Libya is increasing, it is still not close to full levels. Also, Kazakhstan's Kashagan oil field has had problems starting, with output offline just two weeks after the official startup.
"JBC Energy remains bearish on the immediate outlook for the field, given the challenging nature of Kashagan's operating environment, as well as potential pipeline bottlenecks."
The ICE's gasoil contract for October delivery was up $5.00, or 0.5%, at $927.50 a metric ton, while Nymex gasoline for November delivery was up 86 points, or 0.3%, at $2.6353 a gallon.
