Oil prices fall in absence of fiscal deal

GLOBAL oil prices have dipped as Democrats and Republicans remain locked in a stalemate over a deal to resolve the US fiscal cliff, analysts say.

New York's main contract, light sweet crude for delivery in February slid 25 cents to $US89.73 a barrel.

Brent North Sea crude for February reversed 28 cents to $US110.08 a barrel in London afternoon deals on Thursday.

"Crude oil prices slid lower on Thursday, in a healthy correction, after a recent rally that dominated the oil market in the last few days," said analyst Myrto Sokou at brokerage Sucden Financial Research.

"The general momentum is slightly bearish today, with European equity markets reporting renewed losses as 'fiscal cliff' sentiment worsened somewhat with Obama threatening to veto Boehner's 'Plan B', heightening chances that it would not pass through the Democrat-controlled Senate."

With less than two weeks to go before the fiscal cliff of huge tax hikes and deep spending cuts is due to take effect, US lawmakers have still not reached a compromise budget deal to cut the nation's deficit with less painful measures.

Traders remain fearful that the fiscal cliff - due to be implemented on January 1 - could plunge the world's biggest economy back into recession and ravage global oil demand.

President Barack Obama said on Wednesday he and the Republicans had narrowed differences to "a few hundred billion dollars". But a deal remains elusive.

Republicans are loath to raise taxes, while Democrats do not want to cut spending on programs such as Medicare.

House Speaker John Boehner, the Republican negotiating with the president, has said he is willing to extend tax breaks for everyone earning less than $US1 million ($A957,400) per year. Obama has said, however, he is willing to go no higher than $US400,000.

Boehner announced on Wednesday that he will move to pass his measure, which he describes as his "Plan B", through the House on Thursday but Obama warned he would veto the legislation.

Meanwhile traders shrugged off official data on Thursday showing that the US economy grew 3.1 per cent in the third quarter, faster than previously estimated.

Gross domestic product growth in the July-September period was revised upward from prior estimates of 2.7 per cent and 2.0 per cent.

The higher figure reflects upward revisions to consumer spending, exports and government outlays, and downward revision to imports.

"The US GDP data were fairly robust but failed to provide some upside momentum to the oil market as the main focus has been switched to the US fiscal cliff talks," added Sokou.

"Crude oil prices continue to post renewed losses, as risk appetite is limited."

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