* White House to host budget talks with congressional leaders
* U.S. crude stocks slip, products stocks up last week-EIA
* Coming up: CFTC positions data 3:30 p.m. EST Friday (New throughout, updates prices, market activity, adds detail, U.S. economic data)
By Joshua Schneyer
NEW YORK, Dec 28 (Reuters) - Oil prices settled lower on Friday after U.S. data showed a sharp rise in gasoline inventories and as investors worried that U.S. budget negotiators may not reach a deal in time to avert a fiscal crisis that could erode oil demand.
Weekly data from the U.S. Energy Information Administration showed U.S. gasoline stocks rose by 3.8 million barrels last week, capping a five-week build of nearly 23 million barrels. Demand for the motor fuel is down 2.8 percent from the same period of 2011. The weekly build in gasoline stocks was larger than analysts had expected, and EIA data also showed U.S. crude stocks declined by less than expected last week.
The White House set a Friday afternoon meeting with congressional leaders to seek a budget deal to avert looming automatic tax hikes and spending cuts -- the so-called fiscal cliff -- that many fear could push the world’s largest economy into recession.
“All eyes are on Washington,” said Addison Armstrong, senior director for market research at Tradition Energy, in a research note.
U.S. crude futures fell 7 cents to settle at $90.80 a barrel. They were up 2.4 percent on the week. Brent crude fell 18 cents to settle at $110.62 a barrel.
U.S. equity prices slid for a fifth day, on pessimism about whether a budget deal will be reached before year end.
Trading in crude futures was thin during a holiday season lull, with Brent volumes around 40 percent below 30-day average levels, and U.S. crude volumes down by around half.
Brent’s $109.83 session low tested support below the 200-day moving average at $109.94.
U.S February crude dipped below a 100-day moving average level, after reaching the highest front-month price since October -- $91.49 a barrel -- earlier in the session.
International benchmark Brent is still on track for a full-year gain of about 3 percent, although U.S. crude is on track for a 8 percent fall in 2012.
Among the factors have kept average Brent prices near historic highs this year are potential threats to Middle East oil supplies from turmoil in the region and signs of rebounding Chinese and U.S. economic growth.
Separate reports on Friday showed U.S. home resales hitting a 2-1/2-year high in November and Midwest factory activity expanding in December.
The reports follow relatively upbeat U.S. trends in fourth-quarter indicators for consumer spending, housing, employment and manufacturing.
U.S. crude oil inventories fell last week, but only by 586,000 barrels, in the week to Dec. 21, the Energy Information Administration said.
The crude stocks drop was less than the drop of 1.9 million barrels expected in a Reuters survey of analysts.
While crude stockpiles slipped, distillate stocks jumped 2.42 million barrels and gasoline inventories rose 3.78 million barrels.
U.S. January heating oil fell 2.75 cents to settle at $3.0448 per gallon, while RBOB gasoline futures fell 2.14 cents to $2.799 a gallon.
Syria’s opposition leader rejected an invitation from Russia for peace talks with Syrian President Bashar al-Assad’s government to end the civil war.
The West’s dispute with Iran over Tehran’s nuclear program continues to simmer as Iran on Friday began six days of naval drills in the Strait of Hormuz, the region’s vital oil shipping route.
Additional reporting by Robert Gibbons in New York, Jessica Jaganathan in Singapore and Dmitry Zhdannikiov in London; Editing by Kenneth Barry and David Gregorio