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Oil prices fall amid jitters over US govt shutdown

The US government will reach its borrowing limit, or debt ceiling, on Tuesday. If Congress doesn't raise that limit, the government won't be able to pay all its bills and some 800,000 of the 2.1 million federal employees will not go to work.

twitter-logo Associated Press   Kuala Lumpur     Last Updated: September 30, 2013  | 00:00 IST
Oil prices fall amid jitters over US govt shutdown
PHOTO: Associated Press

Oil prices were lower on Monday amid jitters as a battle loomed in Washington among US political leader over a federal budget needed to avoid a partial shutdown of the government.

The US government will reach its borrowing limit, or debt ceiling, on Tuesday. If Congress doesn't raise that limit, the government won't be able to pay all its bills and some 800,000 of the 2.1 million federal employees will not go to work.

A lasting solution seems far off as the White House and Republican lawmakers still disagree sharply on spending cuts and other key budget issues.

"The economy will slow down, confidence will slide and demand for crude will be hurt. There will be a real snowball effect if the partial shutdown goes ahead," said Evan Lucas, analyst with IG in Melbourne.

Benchmark oil for November delivery fell $1.32 to $101.55 per barrel at early afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to close at $102.87 a barrel on the Nymex on Friday.

Goldman Sachs estimated that a three-week shutdown would slow the economy's annual growth rate in the October-December quarter by up to 0.9 per centage point. If so, the growth rate next quarter would be a scant 1.6 per cent, compared with market expectations of a 2.5 per cent growth.

Oil has already fallen for three straight weeks as diplomatic efforts surrounding Syria and Iran eased concerns about Middle East supplies.

Brent crude, the benchmark for international crudes used by many US refineries, fell 87 cents to $107.76 a barrel on the ICE Futures exchange in London.

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