Oil dives to multi-month lows
Oil prices hit multi-month lows on Monday as a budget impasse in the United States threatened to shut down parts of the economy, which is the world's top crude consumer.
New York's West Texas Intermediate (WTI) for November dropped to $101.05 per barrel, which was last witnessed on July 6. The contract later pulled back to $101.72, down $1.15 from Friday.
In afternoon London deals, Brent North Sea crude for delivery in November sank to $107.22 per barrel -- the lowest level since August 9. It later stood at $107.90, down 73 cents from Friday's closing level.
"US oil prices have also slid back to three month lows on perceptions that a US government shutdown will impact demand for oil, and in the process hit the prospects for economic growth in the last quarter of 2013," said CMC Markets analyst Michael Hewson.
"Even Brent prices have come under further pressure putting in their lowest levels this month on a more stable geopolitical climate in the Middle East."
Crude futures tracked losses on global equity markets, as investors across the world fretted over the possibility of a looming US government shutdown.
The US is the world's biggest oil consuming nation and the health of its economy is therefore a key influence on crude prices.
"The energy sector was rather concerned the US budget impasse could hit the country's economic growth which in turn would hurt demand for oil," said dealer Jonathan Sudaria at traders Capital Spreads.
With lawmakers on Capitol Hill unable to reach agreement on a new budget, thousands of federal workers are expected to be told to stay at home from Tuesday.
Traders fear an extended impasse as Republicans say they will only agree to a deal that includes cuts to President Barack Obama's health law overhaul.
Adding to the crisis is a looming row over the US debt ceiling, which must be raised before mid-October, when the government runs out of money to pay its bills.
"Crude oil prices retreated sharply on Monday... as the prospect of a shutdown of the US government seems increasingly likely, causing further uncertain and nervous trading conditions," added Sucden anlayst Myrto Sokou in London.
If the US spending limit is not hiked, Washington will be unable to service its debt obligations and will in turn default.
A similar stand-off in 2011 sent global markets sliding and led to a historic downgrade of the country's top AAA sovereign rating by Standard & Poor's.
"With Democrats and Republicans having huge difficulty in coming to an agreement, the risk of a huge US default is keeping investors on edge," said Inenco analyst Gary Hornby.
"This, added to the political uncertainty in Italy, has weighed on oil prices."
Across in Italy, share prices fell and borrowing costs rose on Monday as the recession-hit country braced for a showdown between Prime Minister Enrico Letta and billionaire tycoon Silvio Berlusconi.
After weeks of bickering, Berlusconi on Saturday said he was pulling his party's five ministers out of a fragile coalition government with the left and called for early elections as soon as possible. Letta called for a confidence vote in parliament on Wednesday.
© 2013 AFP