Crude oil futures drop as focus remains on U.S. fiscal concerns

Investing.com - Crude oil futures were lower during U.S. morning trade on Monday, as focus remained squarely on the U.S. economic outlook and how U.S. lawmakers will deal with the upcoming debt ceiling debate.

Some profit taking also contributed to losses, after New York-traded oil prices rallied to the highest level since mid-September last week.

On the New York Mercantile Exchange, light sweet crude futures for delivery in February traded at USD92.75 a barrel during U.S. morning trade, down 0.35% on the day.

New York-traded oil prices fell by as much as 0.7% earlier in the session to trade at a daily low of USD92.45 a barrel. Oil futures rose to USD93.82 a barrel on January 2, the strongest level since September 19.

New York-traded oil futures climbed 2.5% last week, the fourth consecutive weekly gain and the biggest advance in nearly three months.

Oil futures rallied last week after U.S. lawmakers passed a last-minute bill to avoid the fiscal cliff, a series of looming tax increases and spending cuts that could have pushed the U.S. economy back into a recession.

Focus was expected to remain on the U.S. economy, as investors remained jittery over the longer term fiscal outlook, with negotiations on raising the U.S. debt ceiling still to come in February.

On Friday, the U.S. Department of Labor said the economy added 155,000 jobs in December, easing from an increase of 161,000 in November, suggesting that the recovery in the labor market may be slowing. The unemployment rate held steady at 7.8%.

The jobs report came one day after the minutes of the Federal Reserves’ December policy meeting showed that some policymakers considered an earlier-than-expected end to the bank’s quantitative easing program.

The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery fell 0.35% to trade at USD110.89 a barrel, with the spread between the Brent and crude contracts standing at USD18.14 a barrel.

The spread between the two contracts narrowed to the lowest since September due to the start of an expansion of the Seaway pipeline this week. The expanded line will help alleviate a glut of crude in the Midwest.

Operators of Seaway Pipeline said the flow to the Gulf from Cushing, Oklahoma, the delivery point for the NYMEX oil futures contract, will grow to 400,000 barrels a day from current levels of 150,000 barrels a day.