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.
For its part, the European Union cut its growth expectations for 2012 and 2013, saying the 27-country region would contract by 0.3 percent this year and grow by only 0.4 percent next year. Previously, the EU Commission was expecting flat economic growth this year and 1.3 percent growth in 2013.
A vote in Greece on austerity measures later Wednesday, needed to be approved to access bailout funds, was also weighing on markets.
Brent crude, which is used to price international varieties of oil, was down $1.14 to $109.93 on the ICE Futures exchange in London.
Other energy futures rose in New York trading:
— Wholesale gasoline fell 3.11 cents to $2.6678 a gallon.
— Heating oil lost 2.36 cents to $3.0293 a gallon.
— Natural gas fell 2.9 cents $3.588 per 1,000 cubic feet.
Pamela Sampson in Bangkok and Sarah DiLorenzo in Brussels contributed to this report.