* Senate suspends talks till House Republicans have plan
* Republicans struggle to find common ground on impasse
* Iran says world powers have "good" reaction to its plan
* Western powers temper expectations for quick results in
By Anna Louie Sussman
NEW YORK, Oct 15 Oil prices extended losses late
on Tuesday after credit rating agency Fitch warned that it could
cut the sovereign credit rating of the United States from AAA
due to "political brinkmanship" that was increasing the risk of
a U.S. default.
Oil benchmarks on both sides of the Atlantic finished the
day down about 1 percent, with losses accelerating just before
the market's 2:30 p.m. EDT (1830 GMT) close, as Senator Richard
Durbin told reporters that U.S. Senate negotiations to lift the
U.S. debt limit and reopen the federal government were suspended
until House Speaker John Boehner could work out a fiscal plan
that can proceed in the House of Representatives.
Those losses were compounded by Fitch's announcement, which
came at 4:44 p.m. EDT (2244 GMT).
Oil traded lower throughout the session as the hope for a
deal to end the U.S. debt crisis steadily diminished and talks
proceeded in Geneva around an Iranian proposal to achieve a
breakthrough in a decade-old standoff over its nuclear program.
News of bilateral talks between Iran and U.S. delegations on
the sidelines of the Geneva meeting also weighed on prices going
into the close.
Brent crude dropped by nearly 40 cents on news that
the U.S. Senate would suspend its talks until the House could
come up with a plan. Brent crude futures settled down $1.14 at
$109.90 a barrel in its third straight losing session.
U.S. oil also fell by nearly 40 cents on the news,
and settled down $1.20 at $101.21 a barrel.
Republicans in the U.S. House of Representatives struggled
to find a strategy to end a fiscal impasse, complicating
prospects for a deal with President Barack Obama to reopen the
government and raise the country's borrowing authority.
House Speaker John Boehner said they had not reached any
decisions on how to proceed, but were determined not to allow a
House Republican leaders proposed a plan to reopen the
government and avoid debt default but it was rejected in a
meeting with rank and file lawmakers. The plan differed in a few
important details from one in the U.S. Senate.
"The market seemed to move forcefully on the Senate
suspension," said John Kilduff, partner at Again Capital LLC in
"Oil markets are going to take this hard if we can't get a
NUCLEAR TALKS BEGIN IN GENEVA
Oil prices were also buffeted by talks in Geneva between
Iran and six world powers aimed at resolving the standoff over
Tehran's disputed nuclear ambitions.
Iranian Deputy Foreign Minister Abbas Araqchi described a
negotiation meeting on Tuesday in Geneva as "good" and said he
thought the proposal "has the capacity to make a breakthrough."
However, the White House warned against expecting quick
results from international talks in Geneva on Iran's nuclear
program, saying the discussions are complex and technical and
that economic pressures against Teheran would remain in place.
U.S. stocks hit session lows in afternoon trading as budget
and debt-limit talks in Washington broke down.
The talks that started on Tuesday on Iran's nuclear
development are the first since the election of President Hassan
Rouhani, who has tried to improve ties with the West to pave the
way for an end to sanctions that have cut Iranian oil exports by
more than 1 million barrels per day.
While oil prices could fall around $10 per barrel if
sanctions were removed and Iran resumes full exports, analysts
cautioned that it might still take months, if not years, before
free-flowing Iranian oil would be back on the world market.
"If you're selling the market based on Iran, it seems to be
a little premature because it's a long way to go before
sanctions are lifted and barrels come back onto the market,"
said Andy Lebow, vice president at Jefferies Bache in New York.
GRANGEMOUTH, U.S. OIL STOCKS
Britain's Grangemouth refinery began halting work on Monday
ahead of a 48-hour strike. In 2008, a strike there interrupted
flows of crude through the Forties Pipeline System and shut in
production at 70 North Sea fields, pushing up Brent prices.
BP, which relies on Grangemouth for steam and power
for its Kinneil oil processing terminal, said Tuesday it
understands there is an intent to keep the Forties oil pipeline
operating should the strike proceed, and has advised oil buyers
that crude will keep flowing. .
"The Grangemouth refinery shutdown is going to end up being
somewhat supportive for the market, so it's a sort of push-pull
we're seeing," said Kilduff.
Investors will do without oil inventory data from the U.S.
government this week for the first time since 1979, as the
Energy Information Administration refrains from publishing its
weekly report due to a lack of funds.
U.S. commercial crude oil inventories were forecast to have
increased by 2.2 million barrels in the week to Oct. 11, a
Reuters poll of analysts showed on Monday.
The American Petroleum Institute, an industry group, will
release its weekly inventory report on Wednesday.