Oil down as euphoria over fiscal cliff deal fades

Oil prices were down in Asian trade Thursday as the initial euphoria over the fiscal cliff deal in the United States faded, AFP reports citing analysts. Caution returned to markets, with traders realising tough battles still lie ahead even after the last-minute deal struck by feuding Republican and Democrat lawmakers in the US Congress. New York's main contract, light sweet crude for delivery in February dropped 46 cents to $92.66 a barrel and Brent North Sea crude for February delivery shed 41 cents to $112.06. "The market lost steam after the excessive buying of oil in reaction to the passing of the US fiscal cliff deal," said Victor Shum, managing director of IHS Purvin and Gertz in Singapore. "Some caution has returned to the market. After all, there are going to be more negotiations in the fiscal deal in the next two months," he told AFP. Global financial markets soared Wednesday after the US Congress backed a stop-gap agreement that averted across-the-board tax hikes and automatic spending cuts which some had feared could tip the economy back into recession. However, the US lawmakers only delayed the spending cuts for two months, meaning another debilitating stand-off is almost certain at the end of February. Other feuds yet to be addressed include lifting the US debt ceiling and funding government operations. "Between now and late February, the drama will shift towards two issues -- the lifting of the federal debt ceiling and budget spending cuts," DBS Bank said in a market commentary. "In exchange for their support for increasing taxes on the wealthy, the Republicans would now want the Democrats to agree to spending cuts before agreeing to lifting the debt ceiling. This sets the stage for another drama."