Crude prices tumble on US government shutdown
Brent and WTI prices slipped in October as a partial US government shutdown threatened to depress crude demand from one of the world’s largest oil consumers
The US federal government shutdown from 1 October until 17 October as Congress failed to agree a budget for the 2014 fiscal year. Congress voted through a deal to resolve the political standoff hours before a deadline to raise the $16.7 trillion debt limit.
Brent tumbled to $107 a barrel (/b) on 1 October, down from around $113/b in mid-September. WTI also fell on 1 October, to around $102/b, down from around $108/b in mid-September. An oil glut at Cushing has put pressure on the US benchmark, causing the price differential between WTI and Brent to widen to six month-highs.
US crude stocks climbed by 4 million barrels in the week ending 11 October, reaching 374.5m barrels, according to Energy Information Administration data. On 21 October, WTI fell below $100/b for the first time since July. Brent and WTI were trading around $110.1/b and $99.4/b, respectively, on 22 October.
The International Energy Agency (IEA) has boosted its forecast for global oil demand for 2013 by 90,000 b/d, to 91m b/d, following indications of stronger-than-expected demand in July and August. The US and Egypt registered the strongest spikes in demand in the period - around 215,000 b/d in the US, and 110,000 b/d for Egypt. However, demand drops in Germany, Nigeria and the Netherlands partially offset this.
The agency said global oil demand will grow by 1m b/d, or around 1.1%, this year. It will increase by an additional 1.1m b/d in 2014 as the global macroeconomic climate improves.
The IEA said signs of improvement in European economies and higher-than-expected power demand drove the increased demand forecasts. Europe returned to economic growth in the second quarter of 2013 following six consecutive quarters of contraction. Although European oil demand continues to fall year-on-year, this economic boost has slowed the pace of demand destruction, the IEA said.