LONDON — Brent crude oil fell below $111 a barrel on Friday as a lack of progress in US budget talks to avert a fiscal crisis darkened the outlook for demand in the world’s biggest oil consumer.
Top US Republican legislator John Boehner said on Thursday talks to avert $600bn worth of tax hikes and spending cuts, the so-called fiscal cliff due to start in the new year, had made no substantive progress.
Economists fear the US economy could plunge into recession if a crisis cannot be averted, putting the world economy at risk and slamming the breaks on global energy demand.
Concern about the US budget crisis has kept oil under pressure this month, overwhelming rises spurred by tension in the Middle East. Brent has trimmed early gains and is now on track to end November 1.5% higher.
Brent dropped 10c to $110.66 by 10.40am GMT. US crude was down 10c at $87.97 a barrel.
"No significant progress seems to have been made in the US budgetary dispute, which has led to profit-taking, especially since oil is trading at the upper end of its trading corridor," Commerzbank oil analyst Carsten Fritsch said.
"If the fiscal cliff can be avoided, prices should increase, but Brent is still likely to stay within its current range, between $108 and $115 per barrel," Mr Fritsch said.
Oil demand
US economic growth in July-Sept was revised up to 2.7% from an initial reading of 2% as restocking by businesses provided a big boost, but consumer and business spending were revised lower.
"We are looking at more downward revisions for global oil demand in 2013, and the market is generally oversupplied," Ritterbusch & Associates president Jim Ritterbusch said.
Global oil production has been running ahead of demand throughout 2012, resulting in rising inventories that act as a substantial cushion for unexpected supply shocks and keep a lid on prices.
A Reuters survey suggests the 12-member Organisation of the Petroleum Exporting Countries (Opec) is still producing more than 1-million barrels a day above its target of 30-million barrels a day.
However, support for oil prices continues to come from the political crisis in Egypt and Western sanctions on Iran.
An Islamist-led assembly was expected to finalise a new Egyptian constitution on Friday aimed at ending a political crisis that erupted when President Mohamed Mursi gave himself sweeping new powers last week.
Analysts say turmoil in Egypt is unlikely to affect Middle East oil exports, but the market is unwilling to dismiss completely the risk to supplies from a region that is responsible for a third of world oil production.
