LONDON: Oil slipped below $110 a barrel on Thursday as US budget talks stumbled, stoking concern about demand in the world's biggest oil consumer.
The conflict over the so-called "fiscal cliff" talks is expected to grow more heated as the action shifts to the floor of the US House of Representatives for the first time.
US President Barack Obama has accused opponents of holding a personal grudge against him while the top Republican negotiator John Boehner called the president "irrational".
"Negotiations are (not progressing) which is probably why we're seeing a sell-off today and the risk sentiment coming off," said Natalie Rampono, a commodities analyst at ANZ in Melbourne.
"The markets are being directed by sentiment from the US fiscal cliff talks and so that will have the biggest influence on prices at the moment."
Brent crude slipped 49 cents to $109.87 a barrel by 0941 GMT, after settling $1.52 higher in the previous session - the biggest one-day gain since Nov. 19.
US oil fell 39 cents to $89.59.
While investors still believe the United States will be able to avert a fiscal crisis, oil prices and other riskier assets will remain under pressure as the deadline comes closer with no sign of a deal yet.
However, a patch of promising data from Germany and the United States kept a floor under prices.
Morale at German businesses climbed in December as their confidence in the outlook rose at its fastest rate in 2-1/2 years, boosting hopes Europe's largest economy will bounce back quickly after a weak end to 2012.
Also adding to positive sentiment was data showing US homebuilding permits touched their highest level in nearly 4-1/2 years in November.
Investors are now eyeing weekly US jobless claims data due later on Thursday for further clues on the country's economic health.
Center>Copyright Reuters, 2012
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