Oil Falls First Time in Three Days on Budget Talks

Oil fell for the first time in three days as House Speaker John Boehner said the White House isn’t serious about cutting spending and U.S. retail sales increased less than expected in November.

Prices dropped 1 percent after budget-compromise talks stalled, with both White House and congressional officials saying no progress had been made. Sales rose 0.3 percent last month, the Commerce Department said. The median forecast of 81 economists surveyed by Bloomberg called for a 0.5 percent gain.

“The budget debates seem to have the market’s focus right now,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There are worries about whether we are going to get some agreements coming out of Washington. There is a lot of uncertainty in the economy.”

Crude for January delivery fell 88 cents to settle at $85.89 a barrel on the New York Mercantile Exchange. Prices are down 13 percent this year.

Brent for January settlement on the London-based ICE Futures Europe exchange slid $1.59, or 1.5 percent, to end the session at $107.91 a barrel.

Lawmakers from both parties expressed renewed pessimism about the prospects of reaching a deal before more than $600 billion in tax increases and spending cuts known as the fiscal cliff start taking effect in January.

Fiscal Cliff

“Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to -- and over -- the fiscal cliff,” Boehner said in remarks prepared for a briefing in Washington.

House Democratic Leader Nancy Pelosi, a California Democrat, told reporters today that any talk of deeper spending cuts demanded by Republicans should await discussions on a tax overhaul next year.

Oil also fell on slower-than-expected growth in November retail sales following a 0.3 percent decrease in October, Commerce Department data showed. Car sales jumped to a four-year high, in part because Americans in Hurricane Sandy’s path replaced damaged vehicles.

“People are really looking at retail sales and it’s a major indicator of economic growth,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “The market is also concerned about the talks in Washington.”

U.S. Economy

Consumer confidence in the U.S. stagnated last week, showing a lack of improvement since October. The Bloomberg Consumer Comfort Index slipped to minus 34.5 in the period ended Dec. 9, the lowest level in six weeks.

The U.S., the world’s biggest oil-consuming country, used 18.8 million barrels a day in 2011, or 21 percent of the global total, according to BP Plc (BP/)’s Statistical Review of World Energy.

“We are still mired in sluggish growth,” McGillian said. “We have plenty of supplies and weak underlying fundamentals.”

U.S. gasoline stockpiles climbed 5 million barrels to 217.1 million in the week ended Dec. 7, the most since April 6, the Energy Department said yesterday. The gain followed a jump of 7.86 million barrels in the week ended Nov. 30. Crude supplies rose 843,000 last week.

U.S. gasoline demand slid 3.7 percent last week to 8.52 million barrels a day, the lowest level since Nov. 16, according to data from MasterCard Inc. (MA)

The gasoline-supply gain “comes on the back of the big increase the week before and further underscores poor gasoline demand that we’ve seen in the country,” McGillian said.

OPEC Output

Members of the Organization of Petroleum Exporting Countries should trim crude output so that total production is in line with the group’s 30 million barrel-a-day quota limit, OPEC Secretary-General Abdalla El-Badri said today in a briefing in Vienna.

OPEC nations are currently pumping about 1.5 million barrels a day more than the quota, according to Bloomberg estimates. The 12-nation group reaffirmed its production target at a meeting yesterday in the Austrian capital.

Oil also followed declines in stocks. The Standard & Poor’s 500 Index (SPX) fell for the first time in seven days.

Crude gained earlier as first-time claims for unemployment insurance declined to a nine-week low. Applications for jobless benefits fell to 343,000 in the week ended Dec. 8, the fewest since Oct. 6.

Electronic trading volume on the Nymex was 414,654 contracts as of 3:02 p.m. Volume totaled 722,130 contracts yesterday, 38 percent more than the three-month average and the highest level in a month. Open interest was 1.55 million.

To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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