Oil prices eased in Asian trade Tuesday as the US government began shutting down for the first time in 17 years following a gridlock in Congress over a new budget.
New York's main contract, West Texas Intermediate for delivery in November, fell 30 cents to $102.03 in afternoon trade, while Brent North Sea crude for November dipped 60 cents to $107.77.
With the midnight deadline passing in Washington without any agreement the White House ordered federal agencies to initiate their shutdown procedures, which will see more than 800,000 non-essential federal workers placed on unpaid leave.
The government shutdown will "result in the decrease in demand for oil in the world's top oil consumer, pressuring prices, as hundreds of thousands of government employees would be forced to stay home without any pay", Teoh Say Hwa, head of investment at Phillip Futures in Singapore, said in a note.
Crude prices were also under pressure following landmark contact between Iran and the United States, which could possibly lead to an easing of Western sanctions on the crude producer and allow it to export oil more freely.
Iran's economy has been crippled by a series of UN and US sanctions aimed at bringing an end to its nuclear programme, which the West claims is being used to develop nuclear weapons. Iran denies the assertion.
"Going forward, if sanctions are eased, resulting in increasing exports from Iran, oil prices will continue to be pressured," Teoh said.