(Corrects third paragraph to say U.S. crude is set to rise, not
slide, for the week.)
* Boehner abandons fiscal cliff plan as Republicans balk
* Stokes worries about demand from world's biggest oil
* Brent's target at $111.45 aborted -technicals
* Coming Up: U.S. durable goods orders Weekly; 1330 GMT
By Florence Tan and Manash Goswami
SINGAPORE, Dec 21 Brent crude fell towards $109
a barrel on Friday after talks in the United States to reach an
agreement to resolve a budget crisis stalled, reviving worries
about demand in the world's biggest oil consumer.
Republican lawmakers failed to back an effort to head off
$600 billion worth of indiscriminate tax hikes and spending cuts
that threaten to push the U.S. economy into recession next year.
The dramatic twist, coming after growing optimism just a few
days earlier of an agreement, weighed on Asian shares, the euro
and base metals.
Brent crude slipped 57 cents to $109.63 a barrel by
0439 GMT, declining for a second day. The contract is set to
rise for a second week. The stalemate had a larger impact on
U.S. oil, which fell as low as $88.93 and traded $1 lower
at $89.13. It is set to rise nearly 3 percent this week.
"The latest news that came out just a few hours ago has
caused the broader markets to sell," said Victor Shum, managing
director at IHS Purvin & Gertz. "There's a view that it's a
setback for talks between the Republicans and the White House."
Only 11 days are left to prevent automatic tax hikes and
spending cuts, referred to as the fiscal cliff, and House of
Representatives Speaker John Boehner faced an embarrassing
setback when he failed to unite his lawmakers as many
conservative Republicans are opposed to tax hikes on the richest
A bullish target at $111.45 per barrel has been temporarily
aborted for Brent as it was unable to break resistance at
$110.50, while U.S. oil is expected to hover around resistance
at $90.30 or retrace moderately to $89, according to Reuters
technical analyst Wang Tao.
But the overall outlook for oil demand growth looks set to
improve for 2013 on the back of signs of a recovery in the U.S.
economy, said Ric Spooner, chief market analyst at CMC Markets.
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.
Other data showed factory activity in the mid-Atlantic
region picked up this month, while home resales in November were
the best in three years, indicating the economy retained some
vigor early in the fourth quarter.
"The numbers provide a sound spring board for an improved
growth outlook for the United States in 2013," Spooner said.
Spooner expects Brent to trade between $100 and $120 a
barrel next year and the U.S. contract in a $80-$95 range.
A key factor pushing prices out of the range in the upper
end is an escalation in the geopolitical crisis in the Middle
East. Brent rose to a high of $128 a barrel and has stayed above
$100 through most of the year on supply disruption worries as
tensions over Iran's controversial nuclear programme escalated.
But an uncertain global economic outlook and Europe's long
drawn out sovereign debt crisis have kept gains in check.
"Any increase in threat or physical damage to infrastructure
will lead to spike in prices. Although we have surplus capacity,
there isn't so much of a surplus to absorb a severe disruption,"
Spooner said. "The progress in resolving Europe's debt crisis
will be a source of concern and weigh on the market."
(Reporting by Florence Tan and Manash Goswami; Editing by Chris