Oil prices edge lower on fears of US debt default

Oil rig sunset prices debt default(SOURCE) SINGAPORE: Oil prices edged lower in Asian trade on Monday as the United States faces a potentially devastating sovereign debt default after senators failed to end a budget impasse.

New York’s main contract, West Texas Intermediate for delivery in November was down 26 cents to $101.76 in mid-morning trade, while Brent North Sea crude for November eased 20 cents to $111.08.

Investors are keeping a close eye on the US Senate as it tries to work out a deal to reopen the federal government and raise the country’s borrowing limit before a October 17 deadline.

The government shut down on October 1, a move that has since damaged domestic confidence and undermined America’s reputation as the world’s leading economic superpower.

Harry Reid, the Democratic Leader in the Senate, painted an optimistic picture of a dialogue yesterday with Republicans — represented by top Senator Mitch McConnell — though nothing concrete was disclosed.

“I’ve had a productive conversation with the Republican leader this afternoon, our discussions were substantive, and we’ll continue those discussions,” Reid said. “I’m optimistic about the prospect for a positive conclusion.”

Failure to lift the debt limit by this Thursday would mean the government is unable to pay its bills or service its debts, as it only has $30 billion in hand to meet obligations that can run to $60 billion a day.

“With only three days to go before the US tips over the soft deadline of its debt ceiling, progress on Capitol Hill seemed to come to a standstill,” Desmond Chua, market analyst at CMC Markets in Singapore, said in a note.

“The ball is now thrown back into the Senate’s court, with market watchers hoping that less conservative Republicans in the Senate will support a longer debt limit extension with no conditions attached,” Chua added.