BANGKOK, Thailand—Oil prices fell January 4 as euphoria faded over a budget deal reached earlier this week by US legislators and traders focused on signs of lacklustre demand.
Benchmark crude for February delivery fell 70 cents at late afternoon Bangkok time to US$92.22 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 20 cents to $92.92 per barrel on the Nymex on Thursday.
The deal reached January 1 in Washington prevents the “fiscal cliff” crisis of steep, automatic tax and spending increases from hammering the US economy. But it puts off for two months some hard decisions about spending cuts that are needed to get the country’s mammoth deficit under control.
The package passed Tuesday by the Senate and House extends most of the tax cuts first enacted under President George W. Bush for individuals making less than $400,000 and married couples making less than $450,000.
However, most American taxpayers will still end up paying more federal taxes in 2013. That’s because the legislation did nothing to prevent a temporary reduction in federal payroll taxes from expiring. In 2012, that cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year. That could hurt oil consumption, analysts said.
“We continue to assume that the level of US oil consumption will be flat in 2013…The payroll tax hike in particular is likely to be negative for oil consumption,” Caroline Bain, lead commodities analyst for the Economist Intelligence Unit, said in a market commentary.
Brent crude, used to price international varieties of oil, fell 66 cents to $111.48 a barrel on the ICE Futures exchange in London. In other energy futures trading on the New York Mercantile Exchange:
- Wholesale gasoline fell 2.2 cents to $2.7761 a gallon;
- Heating oil lost 1.1 cents to $3.0137 a gallon; and
- Natural gas rose 2.2 cents to $3.22 per 1,000 cubic feet.