Oil falls below $98 as US debt deadline looms

SINGAPORE (AP) ? Oil prices fell below $98 a barrel Thursday in Asia as a stalemate dragged on among U.S. lawmakers over raising the country’s debt ceiling and a survey showed a contraction in China’s manufacturing.

Benchmark oil for August delivery was down 46 cents to $97.94 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. Crude rose 54 cents to settle at $98.40 on Wednesday.

In London, the September contract for Brent crude rose 15 cents to $118.30 per barrel on the ICE Futures exchange.

President Barack Obama met Tuesday with Democratic and Republican leaders, but so far no deal has been reached about lifting the debt limit and cutting the deficit. Analysts worry that if there is no agreement by the Aug. 2 deadline, the government’s inability to borrow money and pay its bills could trigger a recession.

Crude fell from near $115 in May and has traded in the $90s for most of the last two months amid concern global economic growth and oil demand will slow in the second half. Bank of America Merrill Lynch said it expects crude to drop to $88 in the fourth quarter.

“Economic activity in the U.S. and Europe has been slowing down for a number of months, and leading indicators suggest a deceleration in economic growth ahead,” the bank said.

A survey released Thursday showed signs of a slowdown in Asia too. Manufacturing in the region’s biggest economy, China, contracted in July for the first time this year.

HSBC Corp. said its monthly purchasing managers’ index fell to a 28-month low of 48.9 on a 100 point scale. Numbers below 50 show activity declining.

In other Nymex trading in September contracts, heating oil fell 0.9 cent to $3.12 a gallon while gasoline dropped 1.3 cents at $3.08 a gallon. Natural gas futures for August delivery advanced 3.0 cents at $4.53 per 1,000 cubic feet.