Thursday, 03 January 2013 17:29
LONDON: Oil fell below $112 a barrel on Thursday, pressured by fears of looming budget battles in the United States and rising oil supply, although upbeat economic data from China limited losses.
President Barack Obama and Republicans in Congress face even bigger budget wrangling after a hard-fought deal halted a round of fiscal tightening that threatened to tip the world's largest economy into recession.
"Significant longer-term budgetary issues still need to be addressed, and this problem will be returning to the forefront of trader concerns within the next couple of months," analysts from Jefferies Bache said in a research note.
"In the meantime, we are still having much difficulty constructing a case for higher oil values on fundamental merits alone."
Brent crude fell 79 cents to $111.68 a barrel by 1015 GMT after rising more than 1 percent on Wednesday to settle at the highest since October.
US crude was down 57 cents to $92.55 after closing at its highest since September.
Analysts expect oil prices to drop in 2013 as supply outweighs demand. US crude production has hit a 19-year high, while Russia pumped more oil last year, remaining ahead of Saudi Arabia in production.
Losses in oil prices were checked by data showing that China's services sector expanded in December, fueling hopes that the world's second-largest economy and top energy consumer is recovering.
Center>Copyright Reuters, 2013