SINGAPORE: Brent oil extended overnight losses to edge below $111 per barrel on Tuesday, ahead of talks over Iran's nuclear programme and as lawmakers in Washington closed in on a deal to avoid a debt default.
US senators said Monday a month-long battle over government spending showed signs of giving way to a deal that would reopen federal agencies and push back a possible default for several months, though many hurdles remained as a Thursday deadline drew near.
"Even though it looks like a deal could be finalised before the deadline, nothing has been decided yet. And with such uncertainty, it is not easy for oil traders or hedging managers to take one-sided positions," said Ken Hasegawa, commodity sales manager at Newedge in Tokyo. "All we can do is wait."
Brent crude futures were trading 5 cents lower at $110.99 a barrel at 0246 GMT, after settling down in two previous sessions.
US oil was down 14 cents at $102.27 a barrel, after closing 39 cents higher.
IRAN SANCTIONS
Adding pressure to oil prices, the United States on Monday held out the prospect of quick relief from sanctions for Iran if Tehran moves swiftly to allay concerns about its nuclear programme.
Still, any deal to end sanctions would be complex and take time, both countries said ahead of a two-day meeting due to start in Geneva later on Tuesday.
The talks will be the first since the election of President Hassan Rouhani, who has tried to improve ties with the West to pave the way for an end to sanctions, which have cut Iranian oil exports by more than 1 million barrels per day.
Elsewhere, the UK's Grangemouth refinery began halting work on Monday ahead of a 48-hour strike in a development similar to a 2008 strike that interrupted flows of crude through the Forties Pipeline System and shut in production at 70 North Sea fields, pushing up Brent oil prices.
Oil investors will do without US oil inventory data this week for the first time since 1979, as the Energy Information Administration will not publish its weekly report scheduled for Wednesday due to a lack of government funding.
US commercial crude oil inventories were forecast to have increased 2.3 million barrels for the week ended Oct. 11, a preliminary Reuters poll of analysts showed on Monday.
Industry group American Petroleum Institute will release its weekly inventory report on Wednesday.
Algeria's energy minister said on Tuesday current oil prices were "reasonable" and that it was too soon to predict whether OPEC might change its output target at its meeting in December.
The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, meets on Dec. 4 in Vienna to decide whether to adjust its output target.
While oil prices traded lower on Tuesday, Asian shares rose to their highest in nearly five months on hopes of a US budget deal.
"I don't think the oil market will react much (to a deal), but an agreement will prevent a sharp fall in oil," said Hasegawa at Newedge.
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