Brent Slides On Government Shutdown, Increasing Supply Prospects

Brent crude oil lost ground on Tuesday after the US government began its first shutdown in 17 years.

Failure of Democrats and Republicans to agree on an emergency spending bill left the government without funding and caused many to worry about the number one oil consumer's crude appetite. The shutdown is likely to be short lived, however it could prove to create a setback in the US' recent economic recovery. Brent traded at $107.74 on Tuesday morning at 5:00 GMT.

Related: Market Primer: Tuesday, October 1: Markets Resilient As US Government Shuts Down

Oil prices also fell under pressure as investors watched the US and Iran make progress on their historically icy relationship. Sanctions on Iranian oil have kept nearly 1 million barrels per day from the markets and buoyed prices. Now, as Iranian President Hassan Rouhani works with Barack Obama to resolve the conflict over Iran's nuclear program, many are expecting to see the sanctions eventually lifted which would flood the market with supply.

Although the Iranian government has issued statements saying it hopes to resolve the matter in as little as three months, most aren't expecting any movement for six months at the earliest. The issue is expected to be discussed in detail at another round of talks in Geneva in mid-October.

Libyan oil is slowly returning to the markets as well, as the country works to reopen its export terminals after weeks of protests cut the nation's oil export capacity to less than half. CNBC reported that Libya has been able to restore its exports to 580,000 barrels per day.

Moving forward, investors will be focused on inventory data from the Energy Information Administration for clues about US demand. However, the agency has said the data may not be released if the government shutdown continues.