Oil fell the most in three weeks as traders worried about another heated fiscal debate in Washington and slowing demand for gasolene in the United States
Benchmark crude dropped 86 cents to finish at US$93.28 a barrel in New York. That's the largest decline since December 21. Brent crude, used to price international varieties of oil, dropped US$1.58 to end at US$110.30 per barrel on the ICE Futures exchange in London.
President Barack Obama and congressional Republicans are headed for another showdown over the debt ceiling.
Oil investors fear a reprise of the stand-off in the summer of 2011. Standard & Poor's cut the US credit rating that August and oil dropped about seven percent for the month.
Obama warned of dire consequences if Congress fails to increase the government's borrowing authority. "Investors around the world will ask if the United States of America is in fact a safe bet. Markets could go haywire," the president said.
Traders also saw signs that gasolene demand is declining. Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the difference between what refiners pay for crude oil and what they charge for refined products - known in the industry as the crack spread - has been shrinking. It's a sign "that gasolene demand is still falling appreciably short of prior expectations," he wrote in a note to clients.
In other energy futures trading on the New York Mercantile Exchange, wholesale gasolene fell five cents to finish at US$2.71 a gallon, natural gas rose eight cents to end at US$3.46 per 1,000 cubic feet, and heating oil fell five cents to finish at US$3.01 a gallon.