LONDON: Brent crude slipped toward $109 a barrel on Thursday on rising US oil stockpiles, while fears that the world's largest economy might miss a deadline for next year's budget and risk a recession also kept bulls in check.
Brent crude fell 35 cents to $109.15 a barrel by 0921 GMT, while US crude was at $86.38, down 39 cents. The January Brent contract expires on Friday.
The US dollar strengthening 0.1 percent against a basket of currencies also weighed on oil prices.
Deadlocked talks to avert a "fiscal cliff" of steep tax hikes and budget cuts in the United States returned to investors' focus after announcements by the US Federal Reserve of more monetary stimulus buoyed global markets on Wednesday.
Failure to reach a compromise on the US budget by the end of the year risks pushing the world's biggest oil consumer into recession and has stoked fears that a fragile recovery trend emerging in China and some other countries would be stifled.
Sharp differences on the 2013 budget persisted between Congressional Republicans and the White House on Wednesday, when negotiators warned the showdown could drag on past Christmas.
"People are worried about the economy, the fiscal cliff in the US and the European economy still remains a tricky one," said Richard Langkemper, analyst at Argos North Sea Group in Rotterdam.
"Refinery margins in Europe are very thin at the moment. There will be less intake, we're hearing more and more about run cuts," he added.
US crude inventories rose last week against expectations of a fall while gasoline and distillates stockpiles jumped more than expected. The jump in fuel stocks came despite a pull-back in refinery output and steady import levels.
"You saw distillates stocks and especially gasoline going up, people may be worried about demand now," Langkemper said.
Demand will be sluggish through 2013 as economic expansion stays tepid and crude supply levels comfortable, which could ease price pressure on consumers, the International Energy Agency (IEA) said.
Global oil demand would grow 865,000 barrels per day in 2013 to hit 90.5 million bpd, the IEA said.
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