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Oil fell below $112 a barrel on Thursday, pressured by fears of looming budget battles in the United States and rising oil supply, although upbeat economic data from China limited losses.

President Barack Obama and Republicans in Congress face even bigger budget wrangling after a hard-fought deal halted a round of fiscal tightening that threatened to tip the world's largest economy into recession. Brent crude fell 79 cents to $111.68 a barrel by 1015 GMT after rising more than 1 percent on Wednesday to settle at the highest since October. US crude was down 57 cents to $92.55 after closing at its highest since September. Fueled by the euphoria about the preliminary deal in U.S. politics to avert the full scale fiscal cliff, the oil market started the new year with a price rally as expected. Along with the initially strong euro and stocks, oil futures breached first resistances in the course of the day. Brent and WTI even rose to a 2.5-month high. The economic data released yesterday were rather mixed. However, the better than expected U.S. PMIs generally had a supporting effect. First technical profit-taking was favoured by a falling euro in the afternoon after G.Oil and WTI bounced off their resistances at 948.25 dollars, resp. at 93.80 dollars. Analysts seem sceptical in terms of the pending negotiations that will be resumed in U.S. budget talks. Another reason for concern is the still comfortable supply situation in the USA and thus this price rally is not expected to last. After the holidays, the traded volume was still below average yesterday since traders are just returning to the office and in face of low profits, they are avoiding to take new risk positions. Consequently, trade was quite volatile in the afternoon and in the evening, Still, futures consolidated at a high level and, despite light profit-taking, closed with considerable gains.

ICE Gasoil contract for January delivery settled at 942.50 dollars on Wednesday. This was 15.50 dollars above Monday's settlement. With some 28,000 deals the traded volume was below average.

The technical analysis does not give any clear signals this morning. With WTI at the overbought level, the stochastic oscillator gives a first selling signal, while it is rather bullish for G.Oil. As far as Brent is concerned, the indicator is still neutral since its lines are only touching in the overbought range. If they crossed in the course of the day, it could trigger a selling signal for WTI and turn the technical view slightly bearish. The RSI is still not providing any fresh signals. The indicator still is at the overbought level. However, it is not foreseeable just yet that the 70%-line will be crossed. Especially Brent and WTI remain within their steep upward channels. But given the rebound from their resistances yesterday, there is upward as well as downward potential. Technical analysts cannot clear tendency at the moment and thus take a neutral stance.

U.S.

Nymex Access bullish: Tendency profit-taking at the oil market was favoured this morning by a retreating euro with prices being supported from yesterday's strong profits. Thus futures continue consolidating at a high level but with the euro retreating, they trade softer. Trading interest at Nymex is below average for this time of day. Market participants are waiting for the European market to open and for economic data to be released today.

Survey: Crude oil -1.5; distillates +1.6; gasoline +1.4 million barrels vs previous week

Houston (ex-wharf indications 02-01)
380cst $633
180cst $676
MGO $1010

New Orleans (ex-wharf indications 02-01)
380cst $643
180cst $677
MGO $1002

Singapore (correct as of 1430hrs LT - delivered indications)

WTI is neutral with -$0.02. Paper for Dec are bullish 180cst +$4.75 and for 380cst +$4.75 , Jan contracts were trading with 180cst +$4.25, 380st +$3.25. The cargo market went in upwards direction with 180cst +$5.63, 380cst +$7.77 and MGO +$3.48.

Asian fuel oil prompt viscosity spreads were weaker on Wednesday, with January plunging to a 14-month low. Market fundamentals remained weak with the supply glut persisting. Delivered 380cst in Singapore was seen yesterday in a range between $600-608/mt. Today as yesterday swaps traded up - Bal Jan 380FO value 618.50 (+4.75). This morning the markets are trading slightly higher.

High premiums for prompt deliveries.
380 cst $618
180 cst $625
MDO $939

ARA (Amsterdam - Rotterdam - Antwerp)

Most the ports in NWE experienced difficulties with prompt deliveries due to existing or expected barge tightness. Some bunker suppliers noted that loading terminals were expected to operate for only few days due to holidays and had restricted fuel volumes on the loading side as well, sources said. Rotterdam continued to experience difficulties with low sulfur fuel oil availabilities.

Indications for delivered bunkers:
380cst : $ 596
(1.0 %) :$ 616
180cst: $ 626
(1.0 %):$ 646
MGO 0.1%S: $ 920