WTI hovers over 3 1/2-month low on U.S. debt impasse, Iran talks

West Texas Intermediate swung between gains and losses on Wednesday, hovering over yesterdays 3 1/2 month-low with the deadline for extending the U.S. debt ceiling drawing closer despite signs for progress in negotiations. Iran reassuring Western nations that its prepared to take confidence-building measures on a two-day Geneva meeting also pressured prices. A private report on Wednesday is expected to show U.S. crude stockpiles rose last week.

On the New York Mercantile Exchange, WTI crude for delivery in November traded at $101.07 per barrel at 6:57 GMT, down 0.14% on the day. Prices held in range between days high of $101.39 and low at $100.91 per barrel, near yesterdays three-and-a-half-month low. The contract fell by 1% on Tuesday and extended its weekly decline to 0.6% on Wednesday.

Meanwhile on the ICE, Brent futures for settlement in November fell by 0.25% to $109.15 per barrel at 6:57 GMT. Prices shifted in a days range between $109.50 and $109.01 a barrel. The European benchmark fell by 0.9% on Tuesday and extended its weekly retreat to 1.6% on Wednesday.

Market sentiment remained dampened as the deadline loomed for U.S. lawmakers to break through the fiscal impasse despite recent signs of progress. Senate majority Leader Harry Reid, a Democrat, and Minority Leader Mitch McConnell, a Republican, who began face-to-face talks on Saturday for the first time since July after negotiations between House Republicans and the White House failed, suspended talks on Tuesday while the Republican-controlled House of Representatives was discussing its own bill.

Senate leaders resumed talks after the House scrapped a vote to extend the governments borrowing authority through February February 7 and reopen the government until December 15. Analysts warned that the lack of a long-term solution will just postpone the deadlock for several months. Fitch Ratings said that it could trim the U.S. sovereign credit rating down from AAA.

Ben Le Brun, a market analyst at OptionsXpress in Sydney, said for CNBC: “Theres no doubt there will be a deal, but thats just kicking the can down the road a bit. This issue is still a concern for markets as it will start playing out again in a few months time.”

Also pressuring prices, market players awaited the outcome of the two day-meeting between Iran and six major world powers in Geneva. Deputy Foreign Minister Abbas Araghchi said the Islamic Republic assured diplomats from the U.S., U.K., China, Russia, France and Germany that its prepared to take confidence-building measures by the second quarter of next year. The meeting in Geneva is the first round of negotiations on Irans nuclear program since the election of President Hassan Rouhani.

The U.S. suggested before the meeting that a quick relief from sanctions is possible if Iran manages to swiftly ease concern over its nuclear intentions, although officials were firm that an overnight deal is impossible and negotiations would be complex and take time. Analysts surveyed by Bloomberg on Monday expected that the Brent benchmark may drop by $12 a barrel upon a complete relief of sanctions at time when Saudi Arabia is pumping at the fastest pace since 1989 and non-OPEC supply growth in 2014 is set to be record-high.

Also pressuring the market, the industry-funded American Petroleum Institute is scheduled to release its weekly U.S. oil inventories report at 20:30 GMT on Wednesday. Analysts surveyed by Reuters expected U.S. crude supplies to have gained 2.3 million barrels last week. The report was delayed by one day due to the Columbus Day holiday. The Energy Information Administration, whose statistics are considered as more reliable, will not publish its weekly inventories report for the first time since 1979 due to the lack of government funding.