Global oil prices slid further on Tuesday as the US government shutdown began after lawmakers failed to reach consensus on continued funding of the federal government.
In late afternoon deals, Brent North Sea crude for delivery in November sank to $106.81 -- which was the lowest level since August 9. It later stood at $107.12, down $1.25 from Monday's closing level. Elsewhere, New York's West Texas Intermediate (WTI) for November lost 98 cents to $101.35 a barrel.
Crude futures had already fallen Monday on worries about the possible government shutdown in the United States, which remains the world's biggest oil consuming nation.
"Crude oil prices came under renewed pressure on Tuesday following (the) shutdown of the US government that raised concerns about a slowdown in the US oil demand," said Myrto Sokou, senior research analyst at the Sucden brokerage in London.
The US government shut down at midnight Washington time (0400 GMT) as Republicans and Democrats refused to give ground to reach a budget deal. With the midnight deadline passing in Washington without any agreement the White House ordered federal agencies to initiate their shutdown procedures.
The process will see more than 800,000 non-essential federal workers placed on unpaid leave.
President Barack Obama warned it will hit a nascent recovery in the world's biggest economy, and accused Republicans of holding America to ransom with their "extreme" political demands for his flagship healthcare law to be delayed for a year.
The two sides also appear unlikely to reach a deal to lift the US borrowing limit by mid-October, when the government runs out of cash. This would leave it unable to service its debts and in turn possibly default.
"Barack Obama refused to bow to Republican pressure to delay the health care reform, resulting in partial shutdown of the government," added analyst Fawad Razaqzada at trading firm GFT.
"But the real worry is the looming debt ceiling on 17 October, which is why risk assets have not reacted to the shutdown situation as bad as many had anticipated."
The oil market was also under pressure after 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," added Teoh Say Hwa, head of investment at Phillip Futures in Singapore.
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