Oil futures fall as U.S. debt talks hit rough spot

MADRID (MarketWatch) � Crude-oil prices fell on Thursday, tracking losses for equities as investors pared back riskier assets amid dimming hopes that U.S. politicians will reach a debt deal before the end of the year.

Crude-oil futures for February delivery CLG3 �fell 41 cents, or 0.5%, to $89.58 a barrel. On Wednesday, the January contract � now expired � closed up 1.8% the after scoring four straight winning sessions. Government data showing an unexpected decline in distillate inventories supported those gains. Read: Oil futures score a fourth session of gains

The Energy Information Administration reported Wednesday that for the week ended Dec. 14, U.S. crude supplies dropped by 1 million barrels, less than the 2.3-million-barrel decline forecast by analysts polled by Platts.

Click to Play Are Markets Too Complicated?

U.S. markets have become overly complex and opaque, and an overhaul is required to restore investor confidence, the heads of several of the largest U.S. trading venues told lawmakers.

However, crude has also been gaining in recent sessions as investors have been taking on more risk related to hopes the U.S. won�t go over the so-called fiscal cliff.

Negotiations between Republicans and the White House appeared to sour on Wednesday after President Barack Obama said it was �puzzling� that Republicans have not accepted his latest cliff deal. House Speaker John Boehner vowed to pass a so-called Plan B that would result in tax cuts for most Americans. Read: Republicans 'puzzling' on cliff deal: Obama

The Tell: What's in Boehner's 'Plan B' -- and what's not

Getty Images Enlarge Image

Wall Street stocks fell sharply on Wednesday after a two-session rally as those debt negotiations appeared to hit a rough spot. The Dow industrials DJIA �fell nearly 100 points to 13,251.97. Read: U.S. stocks retreat as cliff tensions rise

In Asia, Tokyo stocks retreated after recent gains. Those losses came even as the Bank of Japan announced a further expansion to its asset-buying program. Read: Bank of Japan eases further, sees uncertainty

European stocks were largely flat after two days of gains.

U.S. stock futures were pointing to a flat to lower start for Wall Street, with a heavy lineup of economic data scheduled for Thursday, including weekly jobless claims, existing home sales and leading indicators. The Tell: What to watch on the U.S. economy on Thursday

The dollar index DXY , which tracks the performance of the greenback against a basket of other major currencies, rose to 79.290 from 79.270 in North American trade late Wednesday. A firmer dollar tends to weigh on prices of dollar-denominated oil prices.

In other energy trading, January natural gas NGF13 �rose 5 cents, or 1.4%, to $3.37 per million British thermal units.

January heating-oil futures HOF3 �fell 1 cent to $3.03 a gallon, while January gasoline futures RBF3 �fell 1 cent, or 0.5%, to $2.73 a gallon.