* Eyes on bigger U.S. budget battles in the next two months
* U.S. crude stockpiles likely fell last week - poll
* Coming up: U.S. weekly API oil stocks at 2130 GMT
By Florence Tan
SINGAPORE, Jan 3 Brent crude slipped below $112
a barrel on Thursday as investors' focus shifted from a deal to
avert the U.S. "fiscal cliff" to rising oil supply and more
budget battles ahead in Washington.
Brent crude fell 57 cents to $111.90 a barrel by
0219 GMT, after rising more than 1 percent on Wednesday to
settle at the highest since October.
U.S. crude for February delivery was down 57 cents to
$92.55 after closing at its highest since September.
"After the initial excitement, reality sets in," said Victor
Shum, oil consultant at IHS Purvin & Gertz. "There will be other
negotiations and the deal is a compromise."
President Barack Obama and congressional Republicans face
even bigger budget battles in the next two months after the
hard-fought deal halted a round of automatic fiscal tightening
that threatened to push the world's largest economy into
"If one focuses on the oil fundamentals, pricing at the
current level appears overbought," Shum said, pointing to a
fragile global economy and growth in oil production from
"In 2013, OPEC may have to limit supply in order to
accommodate a rise in non-OPEC oil production growth," he said.
Crude production in the United States has hit a 19-year high
while Russia pumped the most oil in the world last year, ahead
of Saudi Arabia.
In the United States, a major pipeline expansion that aims
to ease the bottleneck at Cushing, Oklahoma that has depressed
U.S. crude prices should pump at full rates from the end of next
The spread between Brent and West Texas Intermediate
CL-LCO1=R has narrowed to about $19 a barrel, down from 2012
highs of about $26.
Investors will be scouring weekly data on U.S. jobless
claims and oil inventories due later on Thursday for further
cues on economic health and fuel demand in the world's largest
U.S. commercial crude oil stockpiles likely fell last week
due to lower imports as refiners drew down inventories for
year-end tax purposes, a preliminary Reuters poll of eight
The American Petroleum Institute (API) will release its
report on Thursday, delayed due to the New Year day's holiday on
Tuesday. The U.S. government's Energy Information Administration
(EIA) will issue its data on Friday.
(Editing by Michael Urquhart)