Oil falls with consumer confidence

NEW YORK — The price of crude fell Thursday following a reported drop in consumer confidence and also growing pessimism that political leaders in Washington can reach a budget deal.

By afternoon, U.S. benchmark crude fell 65 cents to $90.33 barrel in New York.

Senate Majority Leader Harry Reid said the nation appears headed for automatic tax hikes and spending cuts on Jan. 1 because of a lack of progress in budget negotiations between President Barack Obama and Congress. With time running out to avoid a "fiscal cliff," traders fear that the U.S. could slip into another recession, which would cut demand for energy.

The budget negotiations have begun to drag on consumer confidence, and that too can affect energy prices.

The consumer confidence index fell this month to 65.1, down from 71.5 in November, according to the Conference Board on Thursday. It was the second straight monthly decline and the lowest level recorded since August.

Thursday’s decline in oil followed a big gain from the day before, when reports of higher U.S. home prices and hopes of a budget deal fueled optimism in the market.

Gasoline prices at the pump are up. The national average for gasoline reached $3.261 a gallon, up 1.4 cents from the day before. Gasoline is now 3 cents above a year ago

That drop could be due in large part to refineries using more crude to produce gasoline, diesel and other refined products. Tom Pawlicki, director of market research at EOX Live, told Platts that gasoline supplies should rise as refineries ramp up.