CORRECTED-UPDATE 2-Brent slips towards $109 as U.S. fiscal talks stall

(Corrects third paragraph to say U.S. crude is set to rise, not slide, for the week.)

* Boehner abandons fiscal cliff plan as Republicans balk

* Stokes worries about demand from world's biggest oil consumer

* Brent's target at $111.45 aborted -technicals

* Coming Up: U.S. durable goods orders Weekly; 1330 GMT

By Florence Tan and Manash Goswami

SINGAPORE, Dec 21 (Reuters) - Brent crude fell towards $109 a barrel on Friday after talks in the United States to reach an agreement to resolve a budget crisis stalled, reviving worries about demand in the world's biggest oil consumer.

Republican lawmakers failed to back an effort to head off $600 billion worth of indiscriminate tax hikes and spending cuts that threaten to push the U.S. economy into recession next year. The dramatic twist, coming after growing optimism just a few days earlier of an agreement, weighed on Asian shares, the euro and base metals.

Brent crude slipped 57 cents to $109.63 a barrel by 0439 GMT, declining for a second day. The contract is set to rise for a second week. The stalemate had a larger impact on U.S. oil, which fell as low as $88.93 and traded $1 lower at $89.13. It is set to rise nearly 3 percent this week.

"The latest news that came out just a few hours ago has caused the broader markets to sell," said Victor Shum, managing director at IHS Purvin & Gertz. "There's a view that it's a setback for talks between the Republicans and the White House."

Only 11 days are left to prevent automatic tax hikes and spending cuts, referred to as the fiscal cliff, and House of Representatives Speaker John Boehner faced an embarrassing setback when he failed to unite his lawmakers as many conservative Republicans are opposed to tax hikes on the richest wage-earning Americans.

A bullish target at $111.45 per barrel has been temporarily aborted for Brent as it was unable to break resistance at $110.50, while U.S. oil is expected to hover around resistance at $90.30 or retrace moderately to $89, according to Reuters technical analyst Wang Tao.

But the overall outlook for oil demand growth looks set to improve for 2013 on the back of signs of a recovery in the U.S. economy, said Ric Spooner, chief market analyst at CMC Markets.

DEMAND OUTLOOK

The U.S. economy grew faster than previously thought, at a 3.1 percent annual rate in the third quarter, the Commerce Department said. It was the fastest pace since late 2011 and more than double the second quarter's 1.3 percent rate.

Other data showed factory activity in the mid-Atlantic region picked up this month, while home resales in November were the best in three years, indicating the economy retained some vigor early in the fourth quarter.

"The numbers provide a sound spring board for an improved growth outlook for the United States in 2013," Spooner said.

Spooner expects Brent to trade between $100 and $120 a barrel next year and the U.S. contract in a $80-$95 range.

A key factor pushing prices out of the range in the upper end is an escalation in the geopolitical crisis in the Middle East. Brent rose to a high of $128 a barrel and has stayed above $100 through most of the year on supply disruption worries as tensions over Iran's controversial nuclear programme escalated.

But an uncertain global economic outlook and Europe's long drawn out sovereign debt crisis have kept gains in check.

"Any increase in threat or physical damage to infrastructure will lead to spike in prices. Although we have surplus capacity, there isn't so much of a surplus to absorb a severe disruption," Spooner said. "The progress in resolving Europe's debt crisis will be a source of concern and weigh on the market." (Reporting by Florence Tan and Manash Goswami; Editing by Chris Gallagher)

View the original article here

UPDATE 2-Brent below $110, stalled US fiscal talks cloud outlook

* U.S. crude and distillate stocks fall, capping oil price loss

* Promising German data supports sentiment (Updates prices)

By Jessica Jaganathan

SINGAPORE, Dec 20 (Reuters) - Brent crude slipped on Thursday to trade below $110 a barrel as investors took profits after recent gains as talks to avert a U.S. fiscal crisis stalled, stoking worries about demand in the world's biggest oil consumer.

As a year-end deadline nears, U.S. President Barack Obama and House of Representatives Speaker John Boehner remained locked in intense bargaining over a deal to avoid the so-called "fiscal cliff" of harsh tax hikes and automatic spending cuts that could badly damage an already weak economy.

Significant progress seemed to have been made earlier this week with both Obama and Boehner offering substantial concessions, but talks turned sour again with Obama accusing opponents of holding a personal grudge against him while the top Republican negotiator called the president "irrational".

"Negotiations are (not progressing) which is probably why we're seeing a sell-off today and the risk sentiment coming off," said Natalie Rampono, a commodities analyst at ANZ in Melbourne. "The markets are being directed by sentiment from the U.S. fiscal cliff talks and so that will have the biggest influence on prices at the moment."

Brent crude slipped 49 cents to $109.87 a barrel by 0702 GMT, after settling $1.52 higher in the previous session which was the biggest one-day gain since Nov. 19.

U.S. oil fell 45 cents to $89.53.

While investors still believe the United States will be able to avert a fiscal crisis, oil prices and other riskier assets will remain under pressure as the deadline comes closer with no signs of a deal yet.

However, a patch of promising data from Germany and the United States kept a floor under prices.

Morale at German businesses climbed in December as their confidence in the outlook rose at its fastest rate in 2-1/2 years, boosting hopes Europe's largest economy will bounce back quickly after a weak end to 2012.

Also adding to positive sentiment was data showing U.S. homebuilding permits touched their highest level in nearly 4-1/2 years in November.

Investors are now eyeing weekly U.S. data on jobless claims due later on Thursday for further clues on the country's economic health.

U.S. STOCKS DRAWDOWN SUPPORTS

Oil prices also found early support from a drop in U.S. crude oil and distillate stocks.

Crude stocks fell by 964,000 barrels to 371.65 million barrels, compared with an average analyst forecast for a 1.1 million barrel drawdown in a Reuters poll. Crude imports fell 101,000 barrels per day (bpd) to 8.36 million bpd.

Distillates, which include diesel and heating oil, fell 1.09 million barrels to 116.97 million barrels, versus analyst expectations for a 1 million-barrel build.

"Oil prices could get a little bit of support ... in the slight pick up in heating oil demand with the drop in distillate inventory being greater than expectations ... So if product prices increase, that could sometimes influence oil market sentiment," Rampono said.

Oil prices could also be underpinned by a little-noticed provision in U.S. sanctions against Iran beginning in February that is likely to trap payments abroad for its oil exports running into billions of dollars.

The provision could halt most of the flow of petrodollars to Iran, given that the value of its oil exports is far higher than what it imports from its biggest customers - China, South Korea, India and Japan.

Sanctions on financial transactions with Iran have already made it difficult for buyers to pay for oil from the OPEC producer, triggering supply worries and supporting oil prices. (Editing by Himani Sarkar and Ed Davies)

View the original article here