Oil slips on US budget talks impasse
NEW YORK, USA - THE price of oil fell slightly yesterday as critical budget negotiations in Washington reached an apparent impasse.
Benchmark crude is down 12 cents to US$86.65 a barrel in morning trading in New York.
Enthusiasm for the Federal Reserve's latest moves to boost the US economy, announced Wednesday, waned as budget talks stalled. President Barack Obama and Republican leaders don't appear to be close to reaching a deal before year's end. Without an agreement, hundreds of billions of dollars in tax increases and government spending cuts will automatically take effect in January.
That prospect, known as the "fiscal cliff", has the force to throw the US 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 US 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.