Crude oil prices declined during the Asian trading hours Friday on renewed concern that the U.S. lawmakers may fail to reach a budget deal to avert the $600 billion spending cuts and tax hikes that threaten to push the world’s largest oil consuming nation into a recession early next year.
Light sweet crude for February delivery plunged 0.88 percent or 79 cents to $89.51 a barrel in electronic trading on the New York Mercantile Exchange during the Asian trading hours. Brent crude oil futures for the February delivery declined 0.37 percent or 41 cents to $109.78 a barrel on the ICE futures exchange in London.
Investor sentiment turned negative after the Republican lawmakers Thursday abandoned a vote on an alternative plan -- plan B -- designed to help avert the fiscal cliff citing lack of support. House Speaker John Boehner has been working to gain support for his plan B, which would allow tax rates to rise on households earning more than $1 million.
"The House did not take up the tax measure today because it did not have sufficient support from our members to pass. Now it is up to the president to work with Senator (Harry) Reid on legislation to avert the fiscal cliff," House Speaker John Boehner said in a statement.
“The latest news that came out just a few hours ago has caused the broader markets to sell. There's a view that it's a setback for talks between the Republicans and the White House,” Victor Shum, managing director at IHS Purvin & Gertz, told Reuters.
Crude futures ended higher Thursday as sentiment was buoyed after Boehner said he would continue to work on a plan with President Obama while encouraging U.S. economic data also added to the sentiment. U.S. economic data Thursday was broadly positive with third quarter GDP revised to 3.1 percent from 2.7 percent, the Philly Fed index surprisingly jumped to 8 in November from negative 10.7 in the previous month and existing home sale surged 5.9 percent in November.
Light sweet crude for the February delivery gained 0.2 percent or 15 cents and settled at $90.13 a barrel on the New York Mercantile Exchange while Brent crude for February delivery rose 0.1 percent or 16 and settled at $110.20 a barrel.