Oil prices drop as US "fiscal cliff" talks stall

Oil prices drop as talks stall between Obama and Republican leaders to avert a "fiscal cliff"

Associated Press

BANGKOK (AP) -- The price of oil fell Thursday as fears rose that the U.S. could head over the "fiscal cliff" if political leaders there fail to reach a budget deal to cut the government deficit before the end of the year.

Benchmark crude for February delivery lost 39 cents at late afternoon Bangkok time to $89.59 per barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.58, or about 1.8 percent, to finish at $89.51 per barrel in New York on Wednesday. That was the biggest one-day price rise in a month.

Negotiations between President Barack Obama and Republican House Speaker John Boehner hit a snag Wednesday. The White House threatened to veto Boehner's alternative plan for averting automatic tax increases and government spending cuts that are set to take effect Jan. 1 if no deal is reached.

Without a deal, the hundreds of billions of dollars in spending cuts and tax hikes that will take effect could throw the U.S. economy back into recession, analysts have said. Such a prospect would likely mean decreasing energy demand.

In other energy futures trading, Brent crude, used to price international varieties of oil, fell 62 cents to $109.74 per barrel in London.

On the New York Mercantile Exchange:

— Heating oil lost 0.7 cent to $3.0247 a gallon.

— Natural gas rose 4.8 cents to $3.368 per 1,000 cubic feet.

— Wholesale gasoline fell 1.2 cents to $2.7223 a gallon.

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