Top Stories
Top Stories

Washington's 'antics' to keep lid on oil prices

Getty Images

Benchmark oil prices are likely to flat-line this week until investors get more details and certainty on a deal to raise the U.S. debt ceiling before an October 17 deadline, according to CNBC's latest market survey of traders, analysts and strategists.

Nearly 38 percent of the respondents in CNBC's latest poll of oil market sentiment (9 out of 24) believe prices will be little changed this week, a third (8 out 24) expect prices to fall while around 29 percent (7 out of 24) say prices may gain.

"Investors should wait for clarity or a sell-off in commodities before taking on long positions," said UBS commodity strategists Dominic Schnider and Giovanni Staunovo. "The risk reward is simply not attractive at present, especially with most commodity markets being well-supplied."

(

The government has been partially shuttered since October 1. The shutdown has lasted longer than many expected, and while proposals from both President Barack Obama and congressional Republicans have been viewed as signs of progress, a final agreement remains elusive, Reuters reported. If the $16.7 billion federal borrowing limit is not increased by October 17, it could lead to a U.S. debt default.

Oil speculating on Washington: Pro

"I believe they are moving toward a deal and will get to an agreement but probably not before some significant volatility this week," said Kirk Howell, portfolio manager at Allston Holdings, LLC. who expects to see a test of $100 a barrel for U.S. crude futures this week.

Although the Department of Energy supply data last week showed "a very bearish" build in crude stockpiles, Howell noted, "that mostly took a back seat to the antics in D.C. but if we see inventory builds continue, we'll see another drive lower."

(Read more: The best ways to punish Congress)

Supply tensions affecting oil exports and production in Libya and diplomatic thaw in relations between Iran and the West will also be oil market drivers this week though they are likely to be overshadowed by the debt drama in Washington.

World powers hope to persuade Iran at talks in Geneva on October 15-16 to scale back its uranium enrichment, Reuters reported. The sanctions are taking a heavy toll on Iran's economy – its daily earnings from oil sales have tumbled 60 percent since 2011 to $100 million – but they have not stopped its nuclear push.

CNBC's Sri Jegarajah. Follow him on Twitter @cnbcsri