OilBarrelCorbisBarbaraDavidson460Brent futures edged above $110 per barrel on Wednesday as the United States Senate inched towards a deal to raise the nation’s borrowing authority and provide temporary government funding, easing concerns about weaker demand for oil.

Lawmakers said a deal to extend the government’s borrowing authority to until February 7 was close, helping the world’s biggest economy tide over the immediate crisis.

But without a long-term solution, the same issues will again start grabbing headlines a few months later, Reuters said.

“There’s no doubt there will be a deal, but that’s just kicking the can down the road a bit,” the news wire quoted OptionsXpress market analyst Ben Le Brun as saying.

“This issue is still a concern for markets as it will start playing out again in a few months time.”

Brent crude gained 6 cents to $110.02 per barrel by Wednesday morning, after ending $1.14 lower in the previous session. US oil fell 3 cents to $101.18, after settling down $1.20.

If Congress fails to reach a deal by Thursday, cheques would likely go out on time for a short while for everyone from bondholders to workers who are owed unemployment benefits. But analysts warn that a default on government obligations could quickly follow, potentially causing the US financial sector to freeze up and threatening the global economy.

Fitch Ratings has already warned it could cut the sovereign credit rating of the US from AAA.

Le Brunn said oil prices are expected to stay around the current range until an announcement on a debt deal.


Information from Punch was used in this report.