Oil prices have fallen today in Asian trading; this has happened due to a budget impasse in the United States threatening to shut down parts of the economy. In consequence, Brent crude slipped below $108 a barrel on Monday, and according to market observers it is on the track for its first monthly drop in four months.
The impasse over funding which could see the U.S. government shut for the first time in 17 years has great implications from stocks to energy and currency performance. By 0254 GMT, Brent crude had fallen 80 cents to $107.83 a barrel and is set for a 5.5-percent drop in September. Similarly, the U.S. crude was down $1.20 at $101.67 a barrel.
Potential Strike May Disrupt North Sea Crude Supply
According to reports, a potential strike at the Grangemouth refinery in Scotland could disrupt the North Sea crude supplies, an important part of Brent. Petroineos’ Grangemouth refinery has voted in favor of strike action which may disrupt North Sea oil supplies.
Historically, a two-day strike at Grangemouth in 2008 had a significant impact on supplies.
Apart from the potential strike in Grangemouth refinery, the critical row over the U.S. debt ceiling is also a major issue for investors. According to market observers a lot of risk assets have downward pressure placed on them unless the government comes up with some sort of resolution and culls all uncertainties.
West Texas Intermediate Crude Falls
Following the trend, West Texas Intermediate or WTI crude fell to the lowest in almost three months. It is attributed to the reduced demand in the world’s largest oil consumer, the U.S. if its government fails to reach on to any resolution on the current impasse and potential shutdown.
As tensions over Iran eased and as a potential U.S. government shutdown clouded the outlook for demand, New York’s main contract, West Texas Intermediate for delivery in November fell $1.16 to $101.71 in mid-morning trade. Investors are waiting for any decision on the impasse where Republicans and Democrats are locked in.
Investors Moving Towards Safe Heaven
When oil prices are falling, investors are shifting towards safe havens and for now safe heavens are currencies of Japan and Switzerland. On Monday’s trading, the Swiss franc, the yen and the British pound all benefited. However, the euro faced a challenge and fared worse amidst the news that Italy is on the verge of collapse.
To contact the reporter of this story: Jonathan Millet at email@example.com