Oil Prices Edge Lower on Fears of U.S. Debt Default

Oil prices edged lower in Asian trade Monday as the United States faces a potentially devastating sovereign debt default as lawmakers remain unable to end a budget impasse.

New York's main contract, West Texas Intermediate for delivery in November was down 29 cents at $101.73 in afternoon trade, while Brent North Sea crude for November eased 17 cents to $111.11.

Investors are keeping a close eye on Washington as Democrats and Republicans try to work out a deal to reopen the federal government and raise the country's borrowing limit before a October 17 deadline.

Failure to raise the country's borrowing limit by then would lead to a default that analysts warn could tip the global economy back into recession.

Harry Reid, the Democratic Leader in the Senate, painted an optimistic picture of the dialogue late Sunday with Republicans, though nothing concrete was disclosed.

"I've had a productive conversation with the Republican leader this afternoon, our discussions were substantive, and we'll continue those discussions," Reid said. "I'm optimistic about the prospect for a positive conclusion."

"With only three days to go before the U.S. tips over the soft deadline of its debt ceiling, progress on Capitol Hill seemed to come to a standstill," Desmond Chua, market analyst at CMC Markets in Singapore, said in a note.

"The ball is now thrown back into the Senate's court, with market watchers hoping that less conservative Republicans in the Senate will support a longer debt limit extension with no conditions attached," he added.