Oil slipped for a third day in London because of concern that U.S. lawmakers may fail to avert automatic spending cuts and tax increases that threaten the economy of the world’s biggest crude consumer. Brent crude fell as much as 0.4 percent, while futures in New York traded near their lowest level in a week. Republicans and Democrats probably won’t reach an agreement on a budget deal by year-end to avoid triggering more than $600 billion in measures known as the fiscal cliff, Senator Joseph Lieberman said on CNN’s “State of the Union� program. “Commodity markets are likely to remain exposed on the downside to the risks associated with going over the fiscal cliff,� said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. Brent for February settlement was at $108.69 a barrel, down 28 cents, on the ICE Futures Europe exchange at 10:47 a.m. London time. The number of contracts changing hands was about 82 percent less than the 100-day average. The European benchmark crude was at a premium of $20.04 a barrel to New York-traded West Texas Intermediate, from $20.31 on Dec. 21. Crude for February delivery was at $88.64 a barrel, down 2 cents, in electronic trading on the New York Mercantile Exchange. Prices fell $1.47 to $88.66 a barrel on Dec. 21, the biggest decline since Dec. 6. The volume for all WTI futures traded today was about 78 percent lower than the 100-day average. Brent-WTI Spread WTI has dropped 10 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That has left it at an average discount of $17.45 a barrel to Brent this year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has climbed 1.3 percent this year. “I would imagine the spread between Brent and WTI to continue to diminish,� said Gavin Wendt, a senior resource analyst and founder of Mine Life Pty in Sydney, who forecast it could go as low as $10 a barrel next year. Failing to avoid the fiscal cliff would push the U.S. into recession for the first half of 2013, according to the nonpartisan Congressional Budget Office. President Barack Obama on Dec. 21 urged leaders of both parties to put together an interim bill to keep taxes from rising on middle-income Americans as they work on a more comprehensive package. House Speaker John Boehner failed to win support from his caucus for his proposal that would have extended tax cuts on incomes below $1 million. Funds Bet “Investors are just nervous about exposure to anything at the present time and hence are selling things like oil,� said Mine Life’s Wendt. “Oil is an industrial commodity and potentially once the situation with the fiscal cliff is resolved, we may see an increase.� Hedge funds boosted bullish bets on WTI by the most in more than four months before the budget talks stalled. Money managers raised net-long positions by 19 percent in the seven days ended Dec. 18, according to the Commodity Futures Trading Commission’s Dec. 21 Commitments of Traders report. It was the largest gain since the week ended Aug. 7. Oil in New York has technical resistance along its upper Bollinger Band, around $90 a barrel today, according to data compiled by Bloomberg. Futures fell on Dec. 21 after settling above the indicator the previous day, signaling prices are overbought. Sell orders tend to be clustered near chart- resistance levels. Members of the Organization of the Petroleum Exporting Countries estimate that prices will stabilize above $100 a barrel in 2013 and OPEC will hold an emergency meeting if they fall below that level, Iran’s oil ministry said on its website yesterday, citing Oil Minister Rostam Qasemi. To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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