Brent futures edged down towards $109 a barrel on Monday as oil production resumed in the Gulf of Mexico after a tropical storm, while lingering concerns over the U.S. government shutdown clouded the outlook for demand.
Tropical Storm Karen had prompted producers to shut in nearly two-thirds of oil output in the Gulf of Mexico. But it was downgraded to a tropical depression late on Saturday, with production starting to return to normal by the end of the weekend.
Brent crude had eased 33 cents to $109.11 a barrel by 0255 GMT, after settling higher on Friday and gaining 0.8 percent last week to end a three-week losing run.U.S. crude traded 50 cents lower at $103.34 a barrel, after ending last week up 0.9 percent.
“There are no bullish or bearish factors to drive the market in either direction until we hear significant news out of the United States,” said Yusuke Seta, a commodity sales manager at Newedge in Tokyo. “Most oil traders are lost in the market. They are just waiting and see how the oil market will react.”
He was referring to the nearly week-long U.S. budget impasse and mounting concern it could undermine moves to increase the country’s borrowing limit by an Oct. 17 deadline, raising the possibility of a sovereign bond default.
Republican House Speaker John Boehner vowed on Sunday not to raise the U.S. debt ceiling without a “serious conversation” about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a U.S. default.
We still believe the U.S. congress will come to an agreement before Oct. 17,” said Seta. Brent prices are unlikely to slip below $107.50 a barrel or above $112 a barrel, according to Newedge.
A weakening greenback helped limit losses as it makes it cheaper for importers to buy dollar-priced oil using their own currency. The dollar eased 0.1 percent against a basket of major currencies, within striking distance of an eight-month trough hit last week.
Liquidity may return to Asia from Tuesday when Chinese markets reopen after a week-long holiday, although there’s no major data ahead until the weekend when China publishes trade numbers.
Elsewhere, BP Plc, Marathon Oil, and Chevron were returning workers to offshore facilities in the Gulf of Mexico by helicopter after earlier evacuations, while other companies were also working to restore operations. The Gulf accounts for about 1.3 million barrels a day, nearly a fifth of U.S. oil output.
Information from Reuters/CNBC was used in this report.