Oil falls below $118 a barrel

Oil futures slipped below $118 a barrel after a breakdown of budget talks in the US Congress over the weekend helped drive investors away from volatile and risky assets today.

Worries about a US credit rating downgrade or even default curbed optimism about global economic growth, after last week's preliminary solution to the euro zone debt crisis helped propel Brent to as high as $118.80 a barrel on Friday.

Brent crude for September was 80 cents lower at $117.87 a barrel, after falling by more that $1 earlier in the session.

US oil was 57 cents lower at $99.30, paring losses of more than $1 but off a six-week high of $99.87 on Friday.

With oil prices only marginally off last week's highs, some analysts maintained that worries about a US default remained remote and were unlikely to translate into a real economic crisis.

The collision in the US Congress hit world stocks and pushed gold to a new record high, as money flowed to safer assets on Monday and pre-weekend optimism over the euro zone debt solution faded.

The United States is the world's largest oil consumer. Further US debt discussions have been planned for today and broadly investors have been banking on a last-minute deal.

While raising the borrowing limit would avoid default, it would not necessarily end the threat by rating agencies to cut the US economy's triple-A rating now clouded by its huge debt burden.

Rating agency Standard & Poor's last week reiterated that there was a 50:50 chance the US AAA credit rating could be cut within three months.

Reuters