Oil prices slip on concerns over US budget row

The US government is standing on the brink of a partial shutdown due to a gridlock in Congress over a new budget

Oil prices eased in Asian trade today as the US government stood on the brink of a partial shutdown due to a gridlock in Congress over a new budget.

New York's main contract, West Texas Intermediate for delivery in November, fell 38 cents to $101.95 in mid-morning trade, while Brent North Sea crude for November dipped 33 cents to $108.04.

A mood of crisis enveloped Washington late yesterday as a midnight deadline (0400 GMT) loomed with no sign of compromise between the Democratic-led Senate and Republican House of Representatives to head off the first US government shutdown in 17 years.

More than 800,000 non-essential federal workers were to be placed on unpaid furloughs beginning midnight due to the impasse.

The government shutdown would "result in the decrease in demand for oil in the world's top oil consumer, pressuring prices, as hundreds of thousands of government employees would be forced to stay home without any pay", Teoh Say Hwa, head of investment at Phillip Futures in Singapore, said in a note.

Crude prices were also under pressure following landmark contact between Iran and the United States, which could possibly lead to an easing of Western sanctions on the crude producer and allow it to export oil more freely.

Iran's economy has been crippled by a series of UN and US sanctions aimed at bringing an end to its nuclear programme, which the West claims is being used to develop nuclear weapons. Iran denies the assertion.

"Going forward, if sanctions are eased, resulting in increasing exports from Iran, oil prices will continue to be pressured," Teoh said.