Crude declines a third day amid U.S. budget talk impasse

Oil slipped for a third day in London because of concern that U.S. lawmakers may fail to avert automatic spending cuts and tax increases that threaten the economy of the world’s biggest crude consumer. Brent crude fell as much as 0.8 percent, while futures in New York traded near their lowest level in almost a week. Republicans and Democrats probably won’t reach an agreement on a budget deal by year-end to avoid triggering more than $600 billion in measures known as the fiscal cliff, Senator Joseph Lieberman said on CNN’s “State of the Union” program. “Commodity markets are likely to remain exposed on the downside to the risks associated with going over the fiscal cliff,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. Brent for February settlement was at $108.30 a barrel, down 67 cents, on the ICE Futures Europe exchange at 12:58 p.m. London time. The number of contracts changing hands was about 68 percent less than the 100-day average. The European benchmark crude was at a premium of $19.85 a barrel to New York-traded West Texas Intermediate, from $20.31 on Dec. 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 Dec. 21, the biggest decline since Dec. 6. The volume for all WTI futures traded was about 75 percent lower than the 100-day average. Members of the Organization of the Petroleum Exporting Countries estimate that prices will stabilise above $100 a barrel in 2013 and OPEC will hold an emergency meeting if they fall below that level, Iran’s oil ministry said on its website yesterday, citing Oil Minister Rostam Qasemi. WTI has dropped 11 percent in 2012 as the U.S. 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, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has climbed 1 percent this year. “I would imagine the spread between Brent and WTI to continue to diminish,” said Gavin Wendt, a senior resource analyst and founder of Mine Life Pty in Sydney, who forecast it could go as low as $10 a barrel next year.

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Crude declines a third day amid U.S. budget talk impasse