Oil below $102 as relief over US debt deal fades

AP News
Posted: Oct 17, 2013 8:30 AM

The price of oil slipped back below $102 a barrel on Thursday as relief faded over a U.S. deal to avoid default and amid apparent progress in talks about Iran's nuclear program.

By early afternoon in Europe, benchmark crude for November delivery was down 65 cents at $101.64 a barrel on the New York Mercantile Exchange. On Wednesday, the Nymex contract closed at $102.19, up $1.08.

Wednesday's gains were driven by optimism over the eleventh-hour deal reached by leaders in Congress to reopen the government through Jan. 15 and increase the nation's borrowing authority through Feb. 7. The rally has lost momentum, however, with investors worried that the deal only postpones the debt problems.

Helping press prices down, meanwhile, was the improvement in negotiations on Iran's nuclear program between the Islamic Republic and six world powers. The two sides agreed to meet again in Geneva in early November.

Iran's oil exports have dropped substantially over the past years because of U.S.-led economic sanctions, one of the reasons usually cited by analysts for rising oil prices.

"There is clearly a risk that at least some sanctions against Iran will be lifted before the end of 2014 and the surprises could be sooner rather than later," said Olivier Jakob of Petromatrix in Switzerland.

Elsewhere, a report from the industry-funded American Petroleum Institute said that U.S. stocks of crude oil rose by 5.9 million barrels last week, about twice the build expected by analysts.

"The inventory report published by the (API) ... also had a bearish impact," said a report from analysts at Commerzbank in Frankfurt. They also described a build of 291,000 barrels in Cushing, Oklahoma, the delivery point for the Nymex contract, as "remarkable." Crude stocks in Cushing had fallen every week since mid-July.

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The release of the weekly report from the Energy Department's Energy Information Administration — which would have come later Thursday — is uncertain because of the partial government closure of the past two weeks. The EIA's report is considered the market benchmark.

In other markets, Brent crude's December contract, the benchmark used to set prices for international crudes, was down 62 cents to $109.97 on the ICE Futures exchange in London.

On the Nymex:

— Wholesale gasoline rose 4 cents to $2.70 a gallon.

— Natural gas fell 2 cents to $3.77 per 1,000 cubic feet.

— Heating oil gained 2 cents to $3.04 a gallon.