LONDON: Brent crude oil slipped towards $110 a barrel on Friday as a lack of progress in US budget talks to avert a fiscal crisis muddied the outlook for demand in the world's biggest oil consumer.
Top US Republican lawmaker John Boehner said on Thursday talks to avert $600 billion 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.
Worries over the US budget crisis have 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 up 1.5 percent.
Brent dropped 30 cents to $110.46 by 0910 GMT. US crude was down 20 cents at $87.87 a barrel.
"We are trading day to day based on the running drama over the fiscal cliff, and the market doesn't look very optimistic at the moment," said Carl Larry, a derivatives broker with Atlas Commodities in Houston.
OIL DEMAND
US GDP growth in July-Sept was revised up to 2.7 percent from an initial reading of 2.0 percent 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," said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates.
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 Organization of the Petroleum Exporting Countries is still producing over a million barrels per day (bpd) more than its target of 30 million bpd.
OPEC crude output in November averaged 31.06 million bpd, down from 31.15 million bpd in October, the survey found. OPEC is likely to keep its current output target of 30 million bpd when its members meet next month, OPEC delegates told Reuters.
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.
On Thursday, an alliance of Egyptian opposition groups pledged to keep up protests against Mursi and said broader civil disobedience was possible to fight what it described as an attempt to "kidnap Egypt from its people".
Risk 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.
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