01 October 2013 16:31 [Source: ICIS news]
LONDON (ICIS)--Crude futures dropped by more than $1.00/bbl on Tuesday as the US Federal government began a partial shutdown for the first time in 17 years, forcing more than 700,000 workers to take upaid leave.
By 14:39 GMT, the front-month November ICE Brent contract touched an intra-day low at $107.08/bbl, down $1.29/bbl compared with the settlement on Monday. The contract then edged a few cents higher to trade around $107.12/bbl.
At the same time, the front-month November NYMEX WTI contract was trading around $101.35/bbl, having touched an intra-day low at $101.30/bbl, a loss of $1.03/bbl compared to the previous close.
The US congress forced the US government into a partial shutdown after the Republicans and Democrats failed to agree on a consensus regarding the US budget. Republican law makers want the US government to postpone the Affordable Care Act, frequently known as ObamaCare, for one year in order to agree budget terms, but this was rejected by the Democrats.
However, the major concern is not the temporary shutdown but the looming discussions on the US debt-ceiling. The US government is edging close to its legal limit on the amount of money it can borrow and it requires Republican approval to raise it.
Unless the debt ceiling is raised, the US government may run out of money and also fail to pay for obligations it has already incurred and thus default on debt servicing payments.
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