Reuters reported that Brent crude oil fell below USD 111 per barrel as a lack of progress in US budget talks to avert a fiscal crisis darkened the outlook for demand in the world's biggest oil consumer.
Top US Republican lawmaker John Boehner said on Thursday talks to avert USD 600 billion worth of tax hikes and spending cuts, the so called fiscal cliff due to start in the new year, had made no substantive progress.
Economists fear the US economy could plunge into recession if a crisis cannot be averted putting the world economy at risk and slamming the breaks on global energy demand.
Worries over the US budget crisis have kept oil under pressure this month, overwhelming rises spurred by tension in the Middle East. Brent has trimmed early gains and is now on track to end November up 1.5%. Brent dropped 20 cents to USD 110.56 by 1300 GMT. US crude was down 30 cents at USD 87.77 per barrel.
Mr Carsten Fritsch Commerzbank oil analyst said that "No significant progress seems to have been made in the US budgetary dispute, which has led to profit-taking, especially since oil is trading at the upper end of its trading corridor."
Mr Fritsch said that "If the fiscal cliff can be avoided, prices should increase but Brent is still likely to stay within its current range, between USD 108 and USD 115 per barrel."
US GDP growth in July to September was revised up to 2.7% from an initial reading of 2.0% as restocking by businesses provided a big boost but consumer and business spending were revised lower.
Mr Jim Ritterbusch president of Chicago based Ritterbusch & Associates said that "We are looking at more downward revisions for global oil demand in 2013 and the market is generally oversupplied."
Global oil production has been running ahead of demand throughout 2012 resulting in rising inventories that act as a substantial cushion for unexpected supply shocks and keep a lid on prices.
A Reuter's survey suggests the 12 member Organization of the Petroleum Exporting Countries is still producing over a million barrels per day more than its target of 30 million barrels per day. However, support for oil prices continues to come from the political crisis in Egypt and Western sanctions on Iran.
An Islamist led assembly was expected to finalize a new Egyptian constitution aimed at ending a political crisis that erupted when President Mr Mohamed Mursi gave himself sweeping new powers last week.
Analysts said that turmoil in Egypt is unlikely to affect Middle East oil exports but the market is unwilling to dismiss completely the risk to supplies from a region that is responsible for a third of world oil production.
