The price of oil fell to near $86 a barrel on Thursday after critical budget negotiations in Washington reached an apparent impasse.
By early afternoon in Europe, benchmark oil for January delivery was down 60 cents to $86.17 a barrel in electronic trading on the New York Mercantile Exchange. The contract finished 98 cents higher at $86.77 a barrel in New York on Wednesday after the U.S. Federal Reserve announced new stimulus measures to help the slow-growing U.S. economy.
But enthusiasm withered as signs emerged from Washington that President Barack Obama and Republican leaders were as far apart as ever on reaching a budget deal before year's end. Without an agreement, hundreds of billions of dollars in tax increases and government spending cuts will automatically take effect.
That prospect, known as the "fiscal cliff," has the force to throw the U.S. economy into recession, experts say, likely hurting demand for energy.
"It seems that the fiscal cliff still remains the highest priority for the short term," analysts from Sucden Financial Research in London wrote in a report. "The release of the weekly jobless claims data and the U.S. retail sales figures will be the main focus for today's trading session."
Meanwhile, at an OPEC meeting Wednesday, ministers agreed to keep their daily crude production target unchanged. OPEC also predicted less demand for oil next year in part because of weak economic growth.
Analysts at Capital Economics said in an analysis that "two of the few things that OPEC members can agree on are that the oil market is currently well supplied and that demand for the group's crude will fall next year as non-OPEC production increases further."
Ample supplies and weak demand are two key factors that have kept oil prices in check in recent weeks.
Brent crude, used to price international varieties of oil, was down 30 cents to $109.20 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Heating oil added 0.66 cent to at $2.9734 a gallon.
— Natural gas was down 0.9 cent to $3.373 per 1,000 cubic feet.
— Wholesale gasoline fell 0.96 cent to $2.6369 a gallon.
- Politics & Government
- New York Mercantile Exchange
- President Barack Obama