After the initial optimism following Tuesday's deal to resolve the fiscal cliff, oil futures dipped in price early on Thursday morning.
While the U.S. economy was eventually spared from the nearly $600 billion in automatic tax increases and spending cuts scheduled to go into effect starting January 1, Reuters reports that this success is being overshadowed by the next looming budget debate.
The U.S. Treasury is already preparing to implement measures to raise added funds, but will need to exceed the borrowing limits set by the national debt ceiling within the next two months, sparking yet another major battle between Democrats and Republicans.
"Significant longer-term budgetary issues still need to be addressed, and this problem will be returning to the forefront of trader concerns within the next couple of months," said a research note from Jefferies Bache.
By 11:40 New York time, West Texas Intermediate crude oil prices fell 3 cents, a 0.03 percent decline to $93.12 per barrel. Meanwhile, Brent crude oil dropped 20 cents, falling 0.18 percent to $112.31 per barrel.
The Wall Street Journal notes that the spread between Brent and U.S. oil prices has fallen in recent weeks, particularly as the Seaway pipeline expansion aimed at easing the glut at Cushing, Oklahoma, nears completion.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
