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Crude Oil Futures Fall As US Shutdown Persists, World Bank Trims China

Published 10/07/2013, 05:21 AM
Updated 07/09/2023, 06:31 AM

Crude oil futures declined Monday as a partial U.S. government shutdown entered its second week, while the deadline for the government debt ceiling approached, and after Tropical Storm Karen blew over the weekend.

Crude prices were also under pressure Monday after the World Bank reduced its growth forecasts for China, the world’s second-largest oil consumer, and other countries in the Asia-Pacific Region, citing slower growth and weaker commodity prices.

Most of East Asia is now forecast to grow at a rate of 7.1% this year and 7.2% in 2014, down from an earlier estimate of 7.8% and 7.6% respectively. China is expected to expand at a rate of 7.5% this year and 7.7% in the next, even below the IMF’s estimates for 7.5% growth in 2013.

Crude oil futures for November Delivery dropped to $102.77 per barrel, compared with $103.62 late Friday.

Brent for November delivery also declined to $108.40 per barrel from $109.27 a barrel late Friday. As of 08:04 GMT

U.S. Shutdown
The U.S. was forced to curtail government operations last week after a politically divided Congress failed to approve a short-term funding measure to allow the nation to pay its bills past the end of its fiscal year on Sept. 30. As a result, 800,000 federal workers were furloughed and scores of nonessential services were halted.

Now, Congress faces another deadline that could prove highly damaging to the U.S. economy if missed. The nation`s debt ceiling, also known as its borrowing limit, must legally be raised before Oct. 17. The U.S. Treasury estimates it will have $30 billion of cash on hand on that day, but the money will be exhausted quickly - government bills can run as high as $60 billion on a single day.

Moreover, the government could default on its obligations to service its debt - which could lead to the first-ever default on government debt.

The shutdown lowers oil prices, since energy would be needed less in a prolonged halt to government activities. Analysts say oil traders tend to stay on the sidelines in times of uncertainty.

The protracted U.S. government shutdown has affected the release of important economic data.

The Commodity Futures Trading Commission said it won`t produce its reports on holdings of money managers and producers in major commodity futures contracts including oil.

Tropical Storm Karen
Oil and gas companies that had shut production in the U.S. Gulf of Mexico are gradually restarting operations after Tropical Storm Karen dissipated before making landfall over the weekend.

"Once we have confirmed that our systems are both safe and operational, we will begin the process of returning to normal operations," ExxonMobil said in a statement.

ExxonMobil is one of the oil and gas producers in the U.S. Gulf. It said its gross production of around 1,000 barrels a day of liquids remained shut as of Sunday morning.

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