Brent crude fell sharply to its lowest level in nearly two months, following sharp losses in other commodities, on worries that a shutdown of the U.S. government will crimp demand in the world’s largest oil consumer.
The US government began a partial shutdown on Tuesday for the first time in 17 years, potentially putting up to one million workers on unpaid leave, closing national parks and stalling medical research projects.
Oil has come under downward pressure in the past month as supply has improved, with Libya ramping up output while tensions over Syria and Iran have eased.
Talks between President Barack Obama and top Republicans on Wednesday failed break the impasse, with both sides accusing the other of refusing to negotiate.
The breakdown ensures the world’s largest economy heads into a third day of a government spending freeze Thursday, raising fears that the gridlock will continue into the middle of the month and trigger a catastrophic debt default.
Crude inventories in the US rose sharply last week as refinery utilisation fell, while the drawdown at Cushing, Oklahoma slowed.
Crude stockpiles increased by nearly 5.5 million barrels, data from the US Energy Information Administration showed, against analysts’ forecasts for a 2.3 million barrel rise.
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