Brent Slips as Domestic Uncertainty Outweighs Middle Eastern Conflict
The market's focus shifted from supply to demand on Tuesday, and Brent crude oil prices slipped toward $110 as a result. The commodity traded at $110.66 on Tuesday morning, in response to uncertainty about the U.S. economy in 2013.
Weak manufacturing data from the U.S. showed that factory activity in the nation was at its lowest since July 2009. Many attribute the slow-down to the aftermath of U.S. super storm, Hurricane Sandy, but some analysts say it has more to do with worries about the looming fiscal cliff.
President Obama's reassuring comments that he expected negotiations to conclude before Christmas have long been forgotten, as investors eye the ongoing battle between Republicans and Democrats within the U.S. government. The two must come to an agreement about how to solve the country's deficit before January 1, when a bundle of tax increases and spending cuts will kick in.
On Monday, a Republican proposal, which included tax reforms and spending cuts, was rejected because it did not support the President's initiative to raise taxes on the wealthiest Americans.
While the concern about the U.S. economy weighs on prices, concern about supply interruption in the Middle East lent support to Brent prices. According to to Reuters, the ceasefire agreement between Israel and Palestine is in danger of breaking because of comments from Israel, claiming the nation will continue to expand into West Bank and Jerusalem.
Adding to concern, is the ongoing violence in Syria, where civil conflict has resulted in tension with the country's surrounding neighbors. The United Nations has chosen to withdraw all non-essential staff, causing the market to worry about the region's stability and the possibility of supply interruption.
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