NEW YORK--Oil futures paused Thursday, as traders assessed their next move a day after the biggest drop in oil prices all year.
Light, sweet crude for December delivery rose 67 cents, or 0.8%, to $85.11 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe rose 82 cents, or 0.8%, to $107.64 a barrel.
Futures appeared to take a breather following Wednesday's sell-off of nearly 4%. Oil price nose-dived along with broader markets after the Energy Department said oil and gasoline stockpiles rose sharply last week as Hurricane Sandy squelched fuel demand.
Traders showed little reluctance to buy following the rout as other worries remained on the horizon. Fears over a U.S. government fiscal impasse later this year, worries over the fate of the European Union and uncertainty over Iran's nuclear program all weighed on market sentiment, said Bob Yawger, director of energy futures at Mizuho.
"Everybody's still a bit suspicious about the ability of Republicans and Democrats to get along into the new year," he said.
Oil traders worry about the ability of Congress to avert the so-called fiscal cliff--the multibillion-dollar package of spending cuts and tax rises set to kick in at the end of the year. Without Congressional action, market observers are concerned that the measures could plunge the country back into a recession, curbing already weak demand for oil in the world's biggest crude consumer.
On Wednesday, the Energy Department said gasoline stockpiles rose 2.9 million barrels last week, as demand for fuels on the East Coast tumbled 6% as Sandy shuttered gas stations and kept motorists off the road. Demand for fuel in the U.S. had already been weak due in large part to high unemployment.
The selling wasn't confined to the oil market. Other assets tied to economic performance--from copper to equities--also dropped. Traders cited worries about the lingering effect of Sandy and the budget showdown following Barack Obama's re-election on Tuesday.
"Since the U.S. House of Representatives stayed in Republican hands, hammering out a deal to avoid the looming 'fiscal cliff' at the start of next year will be more of a challenge for the re-elected president," wrote JBC Energy in a research report.
Wednesday's decline sent oil prices to their lowest level since July. The rout accelerated a decline that has gripped the crude market in recent months, due largely to rising supplies in the U.S., persistent economic weakness there and signs of slackening demand from emerging markets like China.
Front-month December reformulated gasoline blendstock, or RBOB, recently traded 2.61 cents, or 1%, higher at $2.6150 gallon. December heating oil rose 2.21 cents, or 0.8%, to $2.9842 a gallon.
