Oil slipped as gasoline supplies climbed to a nine-month high on weaker demand and President Barack Obama sought an up-or-down vote on his proposal to extend tax cuts to avert a fiscal crisis.
Prices fell after the government said gasoline stockpiles rose to 223.1 million barrels last week and distillate inventories gained. Obama met with congressional leaders today and asked for an interim plan to prevent more than $600 billion in automatic tax increases and spending reductions set to begin in January, an official familiar with the talks said.
“We have a big gain in gasoline stocks and demand has been really soft,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The president is going to sit down this afternoon with everybody. I don’t think they’ll get a lot done.”
West Texas Intermediate oil for February delivery fell 7 cents to settle at $90.80 a barrel on the New York Mercantile Exchange. Prices gained 2.4 percent this week, a third consecutive advance.
Oil traded at $91.24 a barrel before the release of the inventory report at 11 a.m. in Washington, two days later than usual because of the Christmas holiday. Trading volume for WTI futures contracts was down 52 percent from the 100-day average.
Brent oil for February settlement slid 18 cents to $110.62 a barrel on the London-based ICE Futures Europe exchange. The number of contracts trading was 44 percent lower than the 100-day average. Brent rose 1.5 percent this week. The European benchmark crude was $19.82 more expensive than New York futures.
WTI has declined 8.1 percent in 2012 as a U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s biggest storage hub. That has left it at an average $17.47 below Brent this year, compared with a premium of about 95 cents in the 10 years through 2010. Brent, the benchmark grade for more than half the world’s crude, has risen 3 percent this year.
Gasoline inventories jumped 3.78 million barrels last week to the highest level since March 23, the Energy Department said. Stockpiles were forecast to increase 850,000 barrels, according to the median of 10 analyst estimates in a Bloomberg survey.
Total petroleum consumption in the U.S. fell 5.5 percent last week to 18.9 million barrels a day, the biggest drop since Aug. 17, the report showed.
“The bigger issue is the consumption side,” O’Grady said. “It’s a reflection of concerns about the economy.”
Distillate supplies, which include heating oil and diesel, gained 2.42 million barrels to 119.4 million. Stockpiles were estimated to drop 850,000 barrels from the prior week.
Inventories of crude oil slipped 586,000 barrels to 371.1 million, the department said. Supplies were forecast to decrease 1.75 million barrels. Stockpiles at Cushing, Oklahoma, the delivery point for New York futures, increased 4.7 percent to a record of 49.2 million barrels.
A failure to reach an agreement to avoid the U.S. spending cuts and tax increases, collectively known as the fiscal cliff, might push the U.S. into recession for the first half of 2013, the nonpartisan Congressional Budget Office has said.
“The fiscal cliff is the 800-pound gorilla in the room,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “If we don’t get a resolution, we’ll have a weaker economy and weaker oil demand.”
The U.S. is the world’s largest oil-consuming country, followed by China and Japan.
“The worry is if you do end up with a recession, it will be negative for oil consumption,” O’Grady said.
Obama, who had been negotiating one-on-one with House Speaker John Boehner, met for just over an hour today with Republicans Boehner and Senate Minority Leader Mitch McConnell, as well as Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats. Treasury Secretary Timothy Geithner also participated in the meeting, said an administration official who spoke on condition of anonymity.
“If they don’t do something to reach a deal, oil futures are going to come off pretty strong,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.