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Friday, Dec 21, 2012 5:45 AM UTC

Oil drops as US ‘fiscal cliff’ approaches

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Topics: From the Wires,

BANGKOK (AP) — Oil prices fell below $90 per barrel Friday as doubts intensified that political leaders in Washington would be able to reach a deal on the budget before a costly and potentially detrimental package of tax hikes and spending cuts automatically kicks in at year’s end.

Benchmark crude for February delivery fell 94 cents at midday Bangkok time to $89.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 15 cents to end at $90.13 per barrel Thursday on the Nymex.

Brent crude, used to price international varieties of oil, dropped 51 cents to $109.69 per barrel in London.

If the Republicans and Democrats don’t work out a compromise before the end of the month, the U.S. could go over the “fiscal cliff,” a reference to hundreds of billions of dollars in big tax increases and government spending cuts that take effect if a budget deal is not reached. Some economists fear that would push the U.S. back into recession, a prospect that would likely mean less energy demand.

Late Thursday, House Republicans abruptly put off a vote on an alternative plan offered by House Speaker John Boehner that would prevent scheduled increases from taking effect on Jan. 1 on all income under $1 million. Obama is seeking a level of $400,000.

In other energy futures trading on the New York Mercantile Exchange:

— Natural gas fell 2.4 cents to $3.438 per 1,000 cubic feet.

— Heating oil fell 1.3 cents to $3.0357 a gallon.

— Wholesale gasoline fell marginally to $2.7358 a gallon.

More By Pamela Sampson.

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