Oil prices drop as US 'fiscal cliff' talks stall

AP News
Posted: Dec 20, 2012 3:27 PM

NEW YORK (AP) — Oil closed above $90 a barrel for the first time in two months Thursday as it tracked an upward move in U.S. stock markets.

Benchmark crude for February delivery ended the day at $90.13 per barrel, up 15 cents, on the New York Mercantile Exchange. Brent crude, used to price international varieties of oil, dropped 16 cents to finish at $110.20 per barrel in London.

Meanwhile, gasoline prices continued to drop, while natural gas prices surged more than 4 percent.

Hopes faded for a pre-Christmas deal to avert the so-called "fiscal cliff" as budget talks in Washington reached a partisan standoff. Without a deal, the hundreds of billions of dollars in spending cuts and tax hikes that will take effect could throw the U.S. economy back into recession, economists believe. Such a prospect would likely mean decreasing energy demand.

Oil was lower for most of the morning then moved higher as U.S. stocks pushed into positive territory in the afternoon.

Natural gas prices gained 14 cents, or 4.2 percent, to end at $3.46 per 1,000 cubic feet after the government reported that the nation's supplies fell last week. Natural gas had dropped 10 percent in the two weeks ended Wednesday as some regions in the U.S. experienced warmer than normal temperatures, which meant less gas was used for heating.

The U.S. national average for gasoline reached its lowest point of the year on Thursday, falling almost a penny to $3.22 a gallon. The average was $3.28 on Jan. 1, and was as high as $3.87 in mid-September.

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

— Heating oil rose 2 cents to finish at $3.06 a gallon.

— Wholesale gasoline gained a penny to end at $2.75 a gallon.