LONDON: Oil prices dropped on Monday as investors focused on the budget deadlock in the United States, the world's biggest consumer of crude.
New York's main contract, light sweet crude for delivery in January slipped 27 cents to $86.58 a barrel.
Brent North Sea crude for February delivery lost also 27 cents to stand at $107.91 a barrel in London midday deals.
"There have been two significant developments over the weekend which could impact on oil prices this week," said analyst Tamas Varga at PVM oil brokers.
"The tragedy in Connecticut in which 20 children and six adults were shot by a 'rogue' gunman could, perhaps, speed up fiscal cliff discussions and encourage Democrats and Republicans to... forgo bickering at a time of national mourning," he wrote in a note to clients.
Varga added that traders were also reacting to Japan's election result and the impact it could have on the country's political relationship with China, a leading consumer of energy.
Global financial markets remained gripped by the looming US fiscal cliff of automatic tax rises and spending cuts which will take effect on January 1, unless a political deal is reached in Washington.
On Sunday, US President Barack Obama vowed to battle gun violence, as a Connecticut town prepared to bury the first victims of last week's rampage at an elementary school.
In Japan, conservative opposition on Sunday swept to victory in national polls as former premier Shinzo Abe's Liberal Democratic Party (LDP) ousted Prime Minister Yoshihiko Noda's Democratic Party of Japan (DPJ) from power.
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