Crude boosted by debt deal

Crude oil futures have rebounded from yesterday’s sharp losses, after Senate leaders reached a compromise plan to extend the US debt limit.

The bi-partisan agreement reached by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell would bring an end to the shutdown with a temporary budget and restore the Treasury’s authority to borrow until next February, provided it is passed by the House of Representatives. The latest indications are that the proposal will be put to the House floor and there are enough votes there for the bill to succeed.

The government shutdown and the impending deadline to raise the debt ceiling have been shaking the financial markets and pressuring the oil price, with worries over how energy demand might be constrained by the political impasse.

IMF chief Christine Lagarde said earlier this week that the political gridlock in Washington posed a threat to both the US and global economy. Any slowing of the US economy is a big blow to the oil market, with over one fifth of the world’s oil usage accounted for by the US.

News of the breakthrough in Washington has therefore pushed both the stock market and the oil market higher. By mid-afternoon in New York, November crude oil futures had bounced 1.46% to $102.65 a barrel.

The weekly petroleum status report from the Energy Information Administration (EIA) will not be released tomorrow because of the partial government shutdown, meaning the parallel report from the American Petroleum Institute (API) is likely to be more closely watched than normal. The API report is scheduled for release at 9.30pm BST tonight.

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