Oil Prices Drop as Fiscal Cliff Talks Stall

NEW YORK (AP) -- The price of oil fell Thursday as hopes faded for a pre-Christmas deal to avert the so-called "fiscal cliff."

Benchmark crude for February delivery was down 18 cents to $89.80 in midday trading on the New York Mercantile Exchange. Brent crude, used to price international varieties of oil, fell 16 cents to $110.20 per barrel in London.

Meanwhile, gasoline prices continued to drop, while natural gas prices surged more than 3 percent.

In Washington, budget talks 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.

Natural gas prices had dropped 10 percent in the two weeks ended Wednesday with some regions in the U.S. reporting warmer than normal temperatures. The price has risen 12 cents, or 3.6 percent, to $3.44 per 1,000 cubic feet so far Thursday after the government reported that supplies fell last week.

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

On the New York Mercantile Exchange:

  • Heating oil rose 1 cent to $3.04 a gallon.
  • Wholesale gasoline gained a penny to reach $2.75 a gallon.

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