Oil prices eased in the Asian trade today as the US Government today shut down — the first time since 1995-96 — as the Republican and the Democrats failed to reach an agreement on spending and budget mainly due to their differences over the healthcare reforms, which is popular as Obamacare.
With neither side blinking, despite last minute hectic efforts from both side, the White House immediately ordered the Federal Government agencies to begin shutting down, furloughing thousands of workers and curtailing some services for the first time in nearly 18 years.
New York’s main contract, West Texas Intermediate for delivery in November, fell 38 cents to $101.95 in the mid-morning trade, while Brent North Sea crude for November dipped 33 cents to $108.04.
More than 800,000 non-essential federal workers were to be placed on unpaid furloughs beginning midnight due to the impasse.
The Government shutdown would “result in the decrease in demand for oil in the world’s top oil consumer, pressuring prices, as hundreds of thousands of government employees would be forced to stay home without any pay”, Teoh Say Hwa, head of investment at Phillip Futures in Singapore, said in a note.
Crude prices were also under pressure following landmark contact between Iran and the United States, which could possibly lead to an easing of Western sanctions on the crude producer and allow it to export oil more freely.
Iran’s economy has been crippled by a series of UN and US sanctions aimed at bringing an end to its nuclear programme, which the West claims is being used to develop nuclear weapons. Iran denies the assertion.
“Going forward, if sanctions are eased, resulting in increasing exports from Iran, oil prices will continue to be pressured,” Teoh said.