SINGAPORE, Nov 28: Brent crude steadied at over $110 per barrel on Wednesday, not far from a one-week low hit in the previous session, as investors nervously eyed talks to head off a looming fiscal disaster in the United States, the world’s top oil consumer.
Supply worries due to tension in Egypt, however, cushioned prices that were locked in a tight range—swinging from a drop of 10 cents to a rise of 9 cents so far in the session.
Brent crude was up 23 cents at $110.10 per barrel by 0452 GMT, after dropping to $109.31 on Tuesday—its lowest since Nov. 20. U.S. Crude was up 4 cents at $87.22 per barrel.
Concern over whether U.S. Lawmakers were putting the world’s largest economy at risk of a recession by failing to make headway in their budget talks are weighing on financial markets, analysts said.
‘The global economy, China, Europe, needs the U.S. economy to grow, and that is why the pressure to get this deal done is greater than before,’ said Carl Larry, a derivatives broker at the Houston-based Atlas Commodities. ‘The global economy can’t afford for America to slip back into a recession.’
The U.S. Congress pushed toward a compromise on Tuesday on a deal to avert the ‘fiscal cliff’ of tax increases and spending cuts due to take effect next year, but an agreement still appeared elusive.
‘The rhetoric emanating from Washington in recent days has not exactly filled traders with an abundance of confidence that a deal will get done comfortably before the deadline,’ said Tim Waterer, sales trader with CMC Markets.
‘Investors had feared that the discussions between Republicans and Democrats would be a long drawn out process and this is exactly what appears to be playing out on Capitol Hill.’
Further depressing the outlook for oil demand, the Organization for Economic Cooperation and Development cut its global growth forecasts, warning that the debt crisis in the recession-riddled euro zone was the greatest threat to the world economy.
‘Another reason why we are seeing some swing in prices is because trading volumes are looking light, we aren’t quite back to levels prior to the holidays,’ Larry said.
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