Investing.com - Crude oil futures trimmed gains on Thursday after a key U.S. Senator said New Year's Day will likely come and go with no deal stuck to avoid the fiscal cliff, a combination of tax hikes and spending cuts due to take effect at the same time with the closure of 2012.
Failure to avoid the fiscal cliff could contract the economy by 0.5% next year if Congress fails to avoid it now or early in 2013, according to Congressional Budget Office estimates.
Trading was choppy.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD91.03 a barrel on Thursday, up 0.05%, off from a session high of USD91.43 and up from an earlier session low of USD90.06.
Fears the U.S. will drive over the fiscal cliff grew after Senate Majority Leader Harry Reid, a Nevada Democrat, said earlier that Jan. 1 may come and go without a deal to prevent tax breaks from expiring and deep spending cuts from kicking in at the close of 2012.
Meanwhile, President Barack Obama and Congress returned to work on Thursday to discuss ways to avoid the fiscal cliff, though hopes continued to fade a deal may be struck in time.
While taxes won't go up across the board on Jan. 2 and while spending cuts will take time to materialize, economists have warned that fiscal uncertainty alone is prompting households and businesses to throttle back on investing and spending, which could cool the U.S. economy even if a deal is struck early in 2013, crimping demand for energy and fuels in the process.
Offsetting economic data in the U.S. sent investors buying and selling the commodity.
U.S. new home sales rose less than expected in November.
The U.S. Census Bureau reported earlier that new home sales rose by 4.4% to a seasonally adjusted 377,000 units in November, missing expectations for an increase to 378,000.
New home sales for October were revised down to 361,000 units from a previously reported 368,000.
Meanwhile, U.S. consumer confidence slumped to a four-month low, industry data showed on Thursday.
In a report, the Conference Board, a market research group, said its index of consumer confidence fell to 65.1 in December from a reading of 71.5 in November, whose figure was revised down from 73.7.
Analysts had expected the index to decline to 70.0 in December.
On a positive note for oil, fewer people sought initial jobless claims in the U.S. than expected last week.
The U.S. Department of Labor said earlier the number of individuals filing for initial jobless benefits in the week ending Dec. 22 fell by 12,000 to a seasonally adjusted 350,000, lower than market calls for a decline of 2,000 to 360,000.
Jobless claims for the preceding week were revised up to 362,000 from a previously reported 361,000,
Continuing jobless claims in the week ended December 15 fell to 3.206 million.
Analysts were expecting that figure to fall to 3.200 million from last week’s revised figure of 3.238 million.
Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were down 0.01% at USD111.06 a barrel, up USD20.03 from its U.S. counterpart.