The doubts over the so-called US "fiscal cliff" that will trigger harsh spending cuts and tax hikes and risk tipping the country back into recession further dented investor appetite for riskier assets such as oil.

Markets have been under pressure after US House of Representatives Speaker John Boehner failed to get lawmakers to support a deal with the White House.

Brent crude fell as low as $108.58 a barrel, the lowest since Dec. 18, and traded 24 cents down at $108.73 by 0556 GMT. US oil slipped 12 cents to $88.54.

"It's all about the US fiscal cliff issue," said Victor Shum, managing director at IHS Purvin & Gertz. "The chances are that we will get a deal between the White House and the Republicans, but the fact that Boehner failed to get members to support his plan is worrying."

With just nine days left, some US lawmakers are voicing concerns the country would go over the fiscal cliff. President Barack Obama and Boehner, the key negotiators, are out of town for Christmas. Congress is in recess, and will have only a few days to act before the Jan. 1 deadline.

Given this scenario, investors are now looking at a stop-gap that puts everything off for a while as the most promising alternative. Such a fix may help delay the spending cuts and tax hikes further into 2013 as well as work to address in a long-term way a budget that has generated deficits exceeding $1 trillion in each of the last four years.

"Equity and commodity markets are likely to remain exposed on the downside to the risks associated with going over the fiscal cliff," Jason Schenker at Prestige Economics said in a report. "I continue to believe that a deal will get done and we will not go into recession next year, but we are running out of time."

The uncertainty and rising oil supplies will put more downward pressure on prices in coming weeks, Shum said.

 Iraq's oil production has exceeded 3.2 million barrels a day (bpd) so far this month and may hit capacity of 4 million bpd in 2014, its Oil Minister Abdul Kareem Luaibi said.

 Shum expects US crude to trade between $85 and $89 a barrel, with Brent around $20 higher than the US benchmark in coming weeks.

 US oil is expected to drop more to $87.30 a barrel, according to Reuters technical analyst Wang Tao, and Brent may keep declining to $107.58, the December 17 low.

Center>Copyright Reuters, 2012