The price of oil fell below $86 a barrel on Monday as traders showed concern about the threat to the US economy if President Barack Obama and lawmakers do not reach an agreement to avoid automatic tax hikes and spending cuts.
Obama and congressional leaders face a January 2 deadline to reach an agreement or come up with a framework to deal with expiring Bush-era tax cuts and automatic spending cuts to defense and domestic programs — known as the “fiscal cliff” — according to a report by Bloomberg.
North American markets have been weighed down by forecasts of rising supplies. The International Energy Agency released its World Energy Outlook 2012 report, which forecasts that the United States will increase output steadily to become the world’s largest oil producer by 2020.
Benchmark crude for December delivery was down 38 cents to $85.69 a barrel on Monday in electronic trading on the New York Mercantile Exchange.
Meanwhile, Brent crude fell 19 cents to $109.21 a barrel on the ICE Futures exchange in London.
The Afghan government has shortlisted companies from Kuwait, the United Arab Emirates and Turkey for a major oil and gas exploration project.
Wahidullah Shahrani, the minister of mines, confirmed that bids from Dubai’s Dragon Oil (LSE:DGO), Kuwait Energy and Turkish Petroleum have been selected for the tender, which involves exploration rights in the Tajik Basin in Northern Afghanistan. The basin’s oil reserves are estimated to be more than 1 billion barrels.
According to weekly counts published by Baker Hughes, the number of rigs drilling in North Dakota has fallen by 10 percent from just over 200 in June to approximately 180 in October.
The downturn has led some analysts to speculate that Bakken might be becoming less attractive due to its high cost and softening oil prices, anticipating that production may start to level off in the near future.
“The boom is far from over … (but) North Dakota’s role as a source of strong incremental demand for drilling rigs may be waning,” analysts at Barclays Capital explained in a note last week.
The White House will approve the Keystone XL pipeline, according to Moody’s Investors Service.
“But approval will not be quick. A prolonged permitting process risks missing the very oil price boom that inspired Keystone XL in the first place,” Stuart Miller, Moody’s vice president, said in a report published on Monday.
Get Our Expert Guide to Oil Investing FREE!Download this FREE Special Report, Oil Investing: Oil Price Forecast and Oil Deposits Around the World