Oil prices gave up a chunk of the previous session's gains to trade near $87 a barrel Wednesday as investor fears over the U.S. economy emerged despite the fairly easy re-election of President Barack Obama.
By early afternoon in Europe, benchmark crude for December delivery was down $1.40 to $87.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $3.06, or 3.5 percent, to finish at $88.71 in New York.
Domestic economic matters, not least over budgetary matters, will dominate the agenda of Obama, who won re-election earlier. An earlier rebound in stock markets ground to a halt as investors worried over Obama's ability to push through a much-needed budget deal with a divided Congress. Failure to reach a resolution would trigger spending cuts and tax increases — the so-called fiscal cliff — that could push the U.S. economy back into recession.
A survey from the U.S. Energy Information Administration also highlighted the headwinds the world's largest economy still faces.
The EIA reckons that U.S. benchmark crude oil prices will be almost 5 percent lower in 2013 than previously forecast because of the sluggish economy. However, it said U.S. daily oil production is projected to rise 8.2 percent from 2012 and the highest since 1993.