* Republicans withdraw support for budget agreement
* Volume thin ahead of year-end holidays
(Updates prices, recasts lead)
NEW YORK Dec 21 Oil prices fell more than 1
percent on Friday, eroding this week's earlier gains after
Republican lawmakers in the United States withheld support for a
proposal to avert the so-called fiscal cliff.
Fears that a budget deal will not be reached before the end
of the year, coupled with downbeat data on consumer morale in
the United States and Germany, fuelled selling across riskier
asset classes including stocks and oil. The dollar gained on
safe haven flows, adding more pressure to crude.
The Republicans late on Thursday abandoned their own
proposed solution, championed by House of Representatives
Speaker John Boehner, to head off $600 billion worth of tax
increases and spending cuts that investors fear could push the
U.S. economy into recession next year.
Efforts to avert that outcome were in disarray by Friday
afternoon, with lawmakers leaving Washington for the holidays.
"The energy complex was swept up in a broad-based
liquidation phase that mainly spun off of another snag in fiscal
cliff negotiations," said Jim Ritterbusch, president of
Chicago-based Ritterbusch & Associates.
Brent February crude fell $1.23 or 1.1 percent to
settle at $108.97 a barrel. The most-active contract has failed
for the past three days to stay above the 200-day moving average
at $110.24 a barrel.
U.S. February crude fell $1.47 or 1.6 percent, as the
fading fiscal cliff hopes hit it harder than Brent.
The slide erased weekly gains in London's Brent crude
market, which had risen earlier on Middle East instability and
expectations for revived growth in China. U.S. crude rose 2.2
percent on the week, its best gain in two months.
VOLUME THIN, SENTIMENT EBBS
Sharp price swings have been aided by thin volumes ahead of
end-of-year holiday's next week, traders and brokers said.
Turnover was 50 percent below the 30-day averages for Brent and
U.S. crude futures at midday in New York.
U.S. RBOB gasoline and heating oil futures
also fell, with heating oil feeling pressure from seasonally
A drop in consumer sentiment in December, as the budget
talks dragged on, added pressure on oil futures on Friday.
The Thomson Reuters/University of Michigan's final reading
on the overall index on consumer sentiment tumbled to 72.9 from
82.7 in November, worse than forecasts for a reading of 74.7 and
the lowest since July.
Analysts are more positive on the prospects for the oil
market in the New Year, following Chinese data showing higher
demand and on expectations of slightly faster global economic
World oil demand growth looks set to rise in 2013 due to a
recovery in the U.S. economy, according to many forecasters.
The U.S. economy grew faster than previously thought, at a
3.1 percent annual rate in the third quarter, the Commerce
Department said. It was the fastest pace since late 2011 and
more than double the second quarter's 1.3 percent rate.
(Reporting by Robert Gibbons in New York and Christopher
Johnson in London; Editing by Grant McCool and Nick Zieminski)