SINGAPORE: Brent futures edged lower towards US$110 per barrel on Wednesday, after lawmakers in Washington made little progress to end a budget impasse that threatens to hurt investor confidence and curb demand in the world’s biggest oil consumer.
Further declines, though, were limited on supply disruption concerns from the Middle East.
US President Barack Obama said on Tuesday he would be willing to negotiate budget issues with Republicans only if they agreed to re-open the government and raise the debt limit.
"The situation in the US is still uncertain, but I believe it will be resolved in time and don’t see much impact on oil markets," said Tetsu Emori, commodity fund manager at Astmax Investments in Tokyo.
" should be looking at the fundamentals rather than political issues, and we see that the oil market is still well supported."
Brent oil traded 7 cents lower at US$110.09 per barrel at 0618 GMT, after settling higher on Tuesday for a third straight session.
US oil was 14 cents higher at US$103.63 per barrel.
Oil also found support from a dollar that hovered near an eight-month low against major currencies. A weak US currency makes dollar-denominated oil cheaper for importers.
Political clashes in Egypt and the capture by US forces of a senior al Qaeda figure in Libya over the weekend raised the risk of supply disruptions in the Middle East and North Africa from key oil producing regions.
The International Monetary Fund (IMF) warned on Tuesday that possible supply disruptions may push oil prices as high as US$150 per barrel next year in two out of three scenarios described in its World Economic Outlook.
"Risks of a spike in oil prices have risen because of the threat of disruptions due to increasing unrest and geopolitical tensions in the Middle East and North Africa," the IMF said.
The IMF also cut its world growth forecasts for the sixth straight time in less than two years, saying a stronger performance in the most advanced economies would not make up for sluggish expansion in the developing world.
US crude stocks rose more than expected last week as refineries cut output, industry group American Petroleum Institute said.
Crude inventories rose 2.8 million barrels, compared with analysts’ expectations for an increase of 1.5 million barrels.
The closely watched US commercial crude inventory data from the Energy Information Administration (EIA) is due later in the day, despite the government shutdown.
In its monthly report, the EIA said global oil markets would be better supplied in 2014 than previously forecast. It projected oil demand growth next year at 1.17 million barrels per day (bpd), a fall of 20,000 bpd from the September forecast.
The government agency also revised up growth in supply of non-OPEC oil by 50,000 bpd to 1.5 million bpd in 2014.
For 2013, the EIA revised its demand growth forecast down by 140,000 bpd to 970,000 bpd. Non-OPEC oil supply growth for 2013 was revised down by 60,000 bpd to 1.51 million bpd.-- Reuters