“Brent crude oil fell below $110 a barrel on Tuesday as protracted U.S. budget negotiations fanned concerns about the health of the global economy and the prospects for energy demand.
Oil fell even though the dollar weakened and European shares added to gains. The euro hit a six-month high as optimism about Greece's plan to buy back debt. Usually oil moves up when the dollar weakens and it also often follows equities on the way up.
But Brent futures fell 1.1 percent to trade at nearly $110 per barrel. On Monday, Brent broke through a key resistance level to close below its 200-day moving average of above $111.
U.S. crude oil futures fell 0.7 percent to trade around $88 per barrel.
"This is related to factors such as demand concerns after the weaker-than-expected U.S. data and the fiscal cliff uncertainty," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
The health of the U.S. economy, the world's top oil consumer, has been worrying investors, especially given the weakness of the euro zone.
Concerns increased after the Institute for Supply Management (ISM) said on Monday its index of U.S. factory activity fell to its lowest since July 2009 on uncertainties over the U.S. budget negotiations and in the aftermath of Hurricane Sandy, which hit the Northeast last month.
U.S. lawmakers are locked in talks over the national budget, trying to avoid a so-called fiscal cliff - a $600 billion package of spending cuts and tax increases effective early in 2013 that threatens to tip the economy back into recession.
Incessant tensions in the Middle East and related worries about the impact on oil supplies from the region will continue to support prices, analysts said.
An escalation of a 20-month old civil conflict in Syria added to fears of supply disruptions as government forces bombarded rebel districts near Damascus and the United Nations decided to withdraw its non-essential staff.
Investors were also awaiting inventory data from the American Petroleum Institute (API) due later on Tuesday. Crude stocks are expected to have risen by 100,000 barrels in the week ended Nov. 30, a preliminary Reuters poll showed.”