Oil slipped for a third day in London yesterday because of concern that legislators in the United States might fail to negotiate the "fiscal cliff" that threatens the economy of the world's biggest crude consumer.
Brent crude fell as much as 0.8 per cent, while futures in New York traded near their lowest level in almost a week.
"Commodity markets are likely to remain exposed on the downside to the risks associated with going over the fiscal cliff," said Jason Schenker, the president of Prestige Economics in Texas. Brent for February settlement was at US$108.35 a barrel, down 62 cents, in mid-afternoon trading on the ICE Futures Europe exchange in London. The European benchmark crude was at a premium of $19.85 a barrel to New York-traded West Texas Intermediate (WTI), from $20.31 on December 21. Crude for February delivery was at $88.45 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange.
Prices fell $1.47 to $88.66 a barrel on Friday, the biggest decline since December 6. The volume for all WTI futures traded was about 75 per cent lower than the 100-day average. Opec members estimate prices will stabilise above $100 a barrel next year and Opec would hold an emergency meeting if they fell below that level, Iran's oil ministry said this week, citing its oil minister, Rostam Qasemi.
WTI has dropped 11 per cent this year as the US shale boom deepened the glut at Cushing, Oklahoma, America's largest storage hub and the delivery point for New York futures. That has left it at an average discount of $17.45 a barrel to Brent this year.
Brent, the benchmark grade for more than half the world's crude, has climbed 1 per cent this year.
"Investors are just nervous about exposure to anything at the present time and are selling things like oil," said Gavin Wendt, a resource analyst. "Once the situation with the fiscal cliff is resolved, we may see an increase."
* Bloomberg News
