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updated: 12/21/2012 7:20 AM

Oil drops as US 'fiscal cliff' approaches

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Associated Press

BANGKOK -- Oil prices fell below $90 per barrel Friday as doubts intensified that political leaders in Washington would be able to reach a deal on the budget before a costly and potentially detrimental package of tax hikes and spending cuts automatically kicks in at year's end.

Benchmark crude for February delivery fell 94 cents at late afternoon Bangkok time to $89.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 15 cents to end at $90.13 per barrel Thursday on the Nymex.

Brent crude, used to price international varieties of oil, dropped 59 cents to $109.61 per barrel in London.

If the Republicans and Democrats don't work out a compromise before the end of the month, the U.S. could go over the "fiscal cliff," a reference to hundreds of billions of dollars in big tax increases and government spending cuts that take effect if a budget deal is not reached. Some economists fear that would push the U.S. back into recession, a prospect that would likely mean less energy demand.

Late Thursday, House Republicans abruptly put off a vote on an alternative plan offered by House Speaker John Boehner that would prevent scheduled increases from taking effect on Jan. 1 on all income under $1 million. Obama is seeking a level of $400,000.

In other energy futures trading on the New York Mercantile Exchange:

-- Natural gas fell 2.7 cents to $3.435 per 1,000 cubic feet.

-- Heating oil fell 1.7 cents to $3.0321 a gallon.

-- Wholesale gasoline fell marginally to $2.7317 a gallon.

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