LONDON: Brent crude held below $111 per barrel on Friday, not far off its highest this month, as US lawmakers were preparing to launch a last-chance round of budget talks to stop the world's largest oil consumer slipping back into recession.
Brent crude was down 10 cents to $110.70 per barrel by 1342 GMT, on course for a weekly gain of about 1.5 percent and a full-year increase of about 3 percent, which would be its smallest in four years.
US crude rose 17 cents to $91.04, set for its first yearly loss in four years.
"We now have to go again into the weekend with the "fiscal cliff" risk, and if it is not solved then crude oil could start 2013 with a correction given that it has for now dissociated itself from equities but without clear new bullish inputs," said Olivier Jakob from Petromatrix consultancy.
Oil futures outperformed stocks this week and Dow Jones industrial average futures was down again on Friday as US President Barack Obama and congressional leaders were set to meet for the first time since November amid low expectations for a "fiscal cliff" deal before Jan. 1.
Instead, members of Congress are increasingly looking at the period immediately after the Dec. 31 deadline to come up with a retroactive fix to avoid the steep tax hikes and sharp spending cuts that economists have said could plunge the country into another recession.
"If no deal is struck oil prices are likely to trade sideways at current levels," said Michael Poulsen at Global Risk Management, adding that investors might beware of big moves on low volume until markets get back to normal after New Year's Day.
POSITIVE DATA
Positive data from the US on Thursday highlighting the momentum building in the economy supported oil prices.
The number of Americans filing new claims for jobless benefits fell to a nearly 4-1/2 year low and new home sales hit their highest level since April 2010.
But capping gains in prices, US consumer confidence fell more than expected in December, dropping to a four-month low, as the fiscal uncertainty pushed back against the recent optimism on the economy.
The American Petroleum Institute said in a report released late on Thursday that US crude inventories fell 1.2 million barrels in the week to Dec. 21, less than expected.
The US Energy Information Administration's oil inventory report is due on Friday at 1600 GMT. The inventory reports were delayed because of Tuesday's Christmas holiday.
Spanish Prime Minister Mariano Rajoy said on Friday that after a tumultuous year he believed there was some calm in the markets and added that Spain had a tough year ahead, especially in the first half.
Concerns about potential supply disruptions in the Middle East continued to support oil prices.
The international envoy seeking a negotiated solution to Syria's 21-month-old conflict said on Thursday political change was needed to end violence which has killed 44,000 people.
Russia invited the leader of Syria's opposition to visit for the first time, but the opposition swiftly dismissed a call by Moscow for talks with President Bashar al-Assad's government to end the civil war.
Center>Copyright Reuters, 2012
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