Oil closes lower as 'cliff' negotiations drag on

AP News
Posted: Dec 04, 2012 3:28 PM

NEW YORK (AP) — Worries over the looming "fiscal cliff" and the health of the U.S. economy drove oil prices lower Tuesday.

U.S. lawmakers have less than a month to reach a compromise to avoid a series of sharp tax increases and spending cuts that take effect in January. Proposals from the White House and Republicans in Congress have failed to find much common ground.

There are few details so far, but the White House estimates its plan would carve $4.4 trillion from the deficit over the coming decade, including previously enacted cuts ($1 trillion) and savings from reduced costs for overseas military operations ($800 billion), as well as interest payments on the national debt ($600 billion).

House Republicans say their plan would cut deficits by $2.2 trillion over 10 years, but they don't claim previous cuts, war savings or interest costs toward that total. Both plans would block automatic spending cuts set to hit the economy in January.

On Monday, there were signs that the lack of a deal may be affecting the economy. U.S. manufacturing shrank in November to its weakest level since July 2009, the Institute of Supply Management said, brought on by the impact of Superstorm Sandy and uncertainty about taxes and government spending cuts.

Benchmark crude finished down 59 cents at $88.50 a barrel in New York.

At the pump, gasoline lost less than a penny overnight to reach a national average of $3.38 a gallon, according to AAA, Wright Express and the Oil Price Information Service. That's down almost four cents in a week but still a dime higher than a year ago.

Brent crude, which is used to price international varieties of oil, lost $1.08 to $109.84 on the ICE Futures exchange in London.

Other futures on the New York Mercantile Exchange:

— Heating oil fell 5 cents to $3.00 a gallon.

— Natural gas lost 5 cents to $3.54 per 1,000 cubic feet.

— Wholesale gasoline fell 3.75 cents to $2.69 a gallon.