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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.