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Oil down modestly, but budget debate looms

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Investing.com - Oil futures slipped modestly in the early part of Tuesday's Asian session after posting a small gain during Monday's U.S. session. Concerns about the possible end of quantitative easing and a looming debt ceiling debate could be weighing on traders' minds.

On the New York Mercantile Exchange, light, sweet crude futures for February delivery fell 0.03% to USD93.17 per barrel in Asian trading Tuesday. During the U.S. session, crude rose to USD93.22 a barrel on Monday, up 0.14%, off from a session high of USD93.30 and up from an earlier session low of USD92.45.

Oil futures could be in focus in the coming weeks as U.S. policymakers inch toward another significant fiscal debate: The debt ceiling. The debt ceiling is the amount of debt the U.S. can carry at any one time and the last time the debate was in focus in 2011, riskier assets, including equities and oil, were punished as political wrangling spooked financial markets.

During the last debt ceiling fiasco, Standard & Poor's stripped the U.S. of the prestigious AAA credit rating. In recent weeks, traders have speculated that another credit downgrade could be in the offing for the U.S. if politicians do not move swiftly to raise the debt ceiling. The U.S. currently has a credit rating of AA+ from Standard & Poor's.

Republican lawmakers have already signaled that they will be firm in their desire to force President Obama to reduce government spending, which is the reason the debt ceiling must be addressed in the first place.

Still reeling from what many Americans view as a loss for the party in the fiscal cliff debate, Republicans may be looking to even the score with President Obama by forcing him to commit to deep spending cuts.

All of this shapes to be potentially woeful for oil because the U.S. is the world's largest oil-consuming nation and any signs of an economic slowdown there will pressure crude prices.

Elsewhere, Brent futures for February delivery fell 0.08% to USD111.44 on the ICE Futures Exchange.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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