* U.S. fiscal talks in focus as deadline nears
* Renewed Iran-U.S. tensions trigger supply worries
* Coming up: U.S. EIA petroleum status report at 1530 GMT
SINGAPORE Dec 5 Brent crude was steady around
$110 a barrel on Wednesday, nursing losses from the previous two
sessions, as investors fretted over the U.S. fiscal crisis
hurting oil demand despite supply fears fanned by Middle East
President Barack Obama and Republican lawmakers are locked
in a battle over measures to tide over the so-called "fiscal
cliff", a program of spending cuts and tax increases that could
push the world's top oil consumer back into recession.
Such a development will worsen the outlook for oil demand,
given subdued services data from China, weak U.S. manufacturing
data from earlier this week and the debt crisis in Europe that
could plunge their economies deeper into recession.
"There are a lot of push-pull factors in the oil markets at
the moment; with the fiscal crisis in the U.S. and the weak
manufacturing data this week, there is certainly some negativity
there," said Ben le Brun, market analyst at OptionsXpress in
Front month Brent futures traded 16 cents higher at
$110 at 0250 GMT, after losing nearly 1 percent in the previous
Prices could hover above support at $109.44 before dropping
to $108.55, according to Reuters analyst Wang Tao. U.S. crude
added 24 cents to $88.74.
Still, political and civil unrest in Egypt and Syria and an
ongoing dispute between Iran and the United States threaten to
disrupt exports from the Middle East, triggering worries about
"Anything to do with the Middle East will underpin prices,
but the big concern at the moment is the continuing tensions
with Iran," added le Brun.
U.S. IN FOCUS
The biggest worry across asset classes remains the U.S.
fiscal negotiations and the current debate on taxes for the
wealthy, proposed by President Obama and opposed by Republicans.
The overall political picture on Tuesday reflected a
relatively solid front of Democrats versus an increasingly shaky
group of Republicans.
Any signs of uncertainty on the fiscal talks' outcome will
increase market jitters as nearly $600 billion of spending cuts
and higher taxes will come into effect in 2013 if a deal isn't
reached by the end of the year.
The absence of a fiscal deal could cut global oil demand by
about 0.6 million barrels per day, JP Morgan analysts estimated
in a report earlier in the week.
The talks have switched investor focus from Europe where an
agreement between euro zone finance ministers and the
International Monetary Fund to help Greece temporarily mitigated
But with more of the region's countries on the brink of a
crisis, the eurozone's troubles are far from over and the
recurring worries will continues to drag down fuel demand.
Weak data from top consumers the United States and China
added to investor worries.
Growth in China's services sector slowed in November as
lacklustre growth in new orders and a surge of recent hires
reduced work backlogs, a survey of purchasing managers in the
services industry showed.
U.S. manufacturing unexpectedly contracted in November to
its lowest level in more than three years, according to a report
MIDDLE EAST TENSIONS SUPPORT
Tensions in the Middle East continued to support prices.
Iran, which is engaged in a dispute with the U.S. over its
nuclear program, said on Tuesday it had captured a U.S.
intelligence drone in its airspace in the last few days, but the
White House said there was no evidence to support the assertion.
A political crisis in Egypt and a worsening civil conflict
in Syria added to concerns that oil supplies from the region may
An inventory report showing a steep drop in crude stockpiles
last week added to the support. Total U.S. stockpiles dropped by
2.2 million barrels in the week to Nov. 30, beating analyst
forecasts for a 300,000 barrel drawdown, data from the American
Petroleum Institute showed on Tuesday.
The Energy Information Administration (EIA) will release its
weekly data later on Wednesday.
(Editing by Ed Davies)