U.S. crude-oil futures settled 1% lower Friday after the International Energy Agency warned that the U.S. fiscal crisis could harm demand and said supplies are rising faster than previously thought.
Light, sweet crude oil for November delivery on the New York Mercantile Exchange settled down 99 cents a barrel, at $102.02 a barrel. The contract fell to an intraday low of $100.60, the lowest level since July 3, before finding its footing as equities markets gained.
The International Energy Agency, the energy-policy watchdog for industrialized nations, warned, in its monthly oil-market analysis on Friday, of significant risks posed by any economic fallout from the political standoff in the U.S. and the sharp currency depreciation in many emerging markets that could undercut its projections.
ICE Brent crude for November fell 52 cents to $111.28. Traders said Brent was finding support relative to the U.S. benchmark as traders worried that continued political instability in Libya would again disrupt the nation's oil exports. In an odd escapade Thursday, Libya's prime minister was temporarily arrested by forces loyal to another faction of the nation's political spectrum.
Brent's premium to the Nymex contract widened 47 cents on the day, to $9.26 a barrel. That is the widest spread since June 4 and compared with a premium of $5.62 a barrel a week earlier.
The U.S. government shutdown is well into its second week, and the Treasury Department's Oct. 17 deadline for raising the debt ceiling is rapidly approaching. House Republican leaders and President Barack Obama failed to strike a deal to reopen the government or raise the debt ceiling in a meeting late Thursday, but did agree to keep talking.
Although the IEA said that a relatively short government shutdown would have a "negligible" impact on the oil market, it warned that concerns over the impending debt ceiling could have a greater detrimental effect on oil demand.
"A significant deterioration in business and/or consumer confidence could potentially undermine the macroeconomic momentum required to drive the additional oil demand growth in 2014," the IEA said.
The agency boosted its forecast for global oil demand growth by 100,000 barrels a day, to 1 million barrels a day for this year, and left the 2014 growth forecast unchanged at 1.1 million barrels a day. But it boosted its forecast for oil output growth outside the Organization of the Petroleum Exporting Countries by 360,000 barrels a day.
At 1.7 million barrels a day, non-OPEC output growth will widely surpass expected oil demand growth and put pressure on OPEC to reduce supplies, or push prices lower, analysts said.
The IEA report comes as U.S. oil inventories have risen sharply during a lull in refiner demand due to seasonal maintenance.
"The focus is on supply and demand now and there is plenty of oil," said Phil Flynn, analyst at Price Futures Group in Chicago.
Mr. Flynn said market activity could thin out in coming weeks after the Energy Information Administration said Friday it is halting its release of weekly oil supply and demand data due to the government shutdown. Analysts said the market instead will focus on similar data from the American Petroleum Institute, a trade group.
November reformulated gasoline futures settled 3 cents lower, at $2.6681 a gallon. November heating oil futures, which trade as a proxy for ultra-low sulfur diesel fuel, settled down 3.51 cents lower at $3.0349 a gallon.
Gasoline futures posted the biggest one-day loss in dollar and percentage terms since Oct. 4, while the loss in heating oil futures was the biggest by both measures since Sept. 23.
