Oil fell along with most other commodities, while Asian shares fell
to a four-week low, after Republicans in the U.S. House of
Representatives were seen backing a two-year budget deal negotiated
behind closed doors.
"Passing of the budget would give the Fed one last reason to exit
the stimulus programme. Expectations are creating a weaker sentiment
for oil and other commodities," said Chee Tat Tan, investment
analyst at Phillip Futures in Singapore.
Brent crude oil fell as much as 21 cents to $109.49 a barrel and was
down 3 cents at $109.67 by 0508 GMT, after settling 32 cents higher.
U.S. crude futures for January delivery were 6 cents lower at
A vote on a tentative budget agreement is likely to be held this
week. A deal would remove fiscal uncertainty ahead of next week's
much-anticipated Federal Reserve meeting.
U.S. crude inventories fell 10.6 million barrels last week to 375
million barrels, according to the Energy Information Administration,
much more than the 3-million-barrel draw forecasted by analysts
polled by Reuters.
But the U.S. benchmark oil contract closed $1.07 lower on Wednesday,
as investors viewed the steep decline as a move by refiners to avoid
taxes instead of a sign of strong demand.
Also weighing on prices was a sharp rise in U.S. gasoline
inventories, signaling weak domestic demand ahead of the holiday
"This is a concern because crude production in the United States is
rising. All put together we see a bearish picture," said Tan of
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Nevertheless, the International Energy Agency (IEA), the West's
energy watchdog, said surging oil demand, especially in the United
States, and faltering supplies mean oil prices face upside risks
over the next few months.
Last month, U.S. oil demand jumped above 20 million barrels per day
(bpd) for the first time since the 2008 financial crisis, IEA data
showed, although it was not clear whether part of this demand
reflected higher exports from U.S. refiners.
Comments from Libyan officials that three oil ports that had
previously shipped around 600,000 bpd of oil could reopen this
weekend weighed on Brent prices.
Seizures of ports and oil fields by protesters demanding a bigger
share of oil exports have slashed Libya's oil shipments to some
110,000 bpd, from more than 1 million bpd in July.
Investors will keep an eye for U.S. weekly jobless claims due at
1330 GMT for signs of continued recovery of the world's biggest
(Editing by Muralikumar Anantharaman
and Tom Hogue)
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