LONDON: Oil retreated on Wednesday, cutting some of the sharp gains seen this week, as investors turned their focus to problems facing the US economy after the re-election of President Barack Obama.
Oil rose sharply on Monday and Tuesday as investors started to anticipate a clear US election result that would end the uncertainty that had contributed to weakness in previous weeks.
Worries about the European economy and whether negotiations in the United States to avert a looming fiscal cliff, which would lead to nearly $600 billion in spending cuts, have now returned to the foreground.
"There's been an Obama bounce, but what's really changed? There are still the problems with the fiscal cliff, and the situation in Europe is still pretty dire," Michael Hewson, an analyst at CMC Markets, said.
Front-month Brent futures were down 84 cents at $110.23 per barrel by 0937 GMT. US crude was down 57 cents at $88.14 per barrel.
Brent was still up 4.6 percent on the week, its biggest such rise since July.
In Greece, a key parliamentary vote on a new set of wage and pension cuts was set for Wednesday, keeping the focus on Europe's debt worries.
Greek protesters took to the streets against the new austerity measures, even though the parliament is expected to approve them by a narrow margin.
The euro zone faces the risk of "aggravation of the situation in Greece, with potential contagion effects to the rest of the area", analysts at Spanish finance company BBVA said in a report.
SUPPLY WORRIES
Supply worries contributed some support to oil prices after Middle East violence escalated again.
Bombs exploded in three districts of the Syrian capital Damascus on Tuesday, killing and wounding dozens, while gunmen shot dead the brother of the parliament speaker in the latest rebel attack on a figure associated with the ruling elite.
Directly impacting the oil supply out of Syria, an explosion hit the main oil pipeline feeding a refinery on the western edge of the city of Homs on Tuesday during fighting between rebels and army forces in the area.
US crude oil inventories fell slightly last week and product stocks rose, data from the American Petroleum Institute showed on Tuesday, confounding analysts' expectations in the wake of storm Sandy, which has caused widespread disruptions to East Coast refineries and terminals.
Inventory data from the Energy Information Administration is scheduled for release later on Wednesday.
Crude inventories are forecast to have risen 1.8 million barrels last week, while product stocks are seen falling, an expanded Reuters poll of analysts showed on Tuesday.
Also supporting US crude, data showed that Sandy had a small impact on regional gasoline demand.
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