Oil dropped to the lowest level in more than a week

Oil dropped to the lowest level in more than a week as concern mounted that negotiations to address the U.S. budget deficit will fail.

Futures decreased as much as 2.1 percent after U.S. Senate Majority Leader Harry Reid said yesterday he was disappointed with progress made during talks over $607 billion in tax gains and spending cuts, the so-called fiscal cliff, set to begin in January. Crude rebounded from the day’s lows after an Energy Department report showed supplies unexpectedly fell last week.

Crude supplies declined 347,000 barrels to 374.1 million in the seven days ended Nov. 23. They were forecast to rise 350,000 barrels, according to the median estimate of 11 analysts.

President Barack Obama, a Democrat, wants to lean more heavily on tax increases for top earners and less on structural changes to Medicare and Medicaid benefits. House Speaker John Boehner, a Republican, has expressed openness to higher revenue if accompanied by an overhaul of the tax code and significant reductions in future spending on entitlement programs.

Crude oil for January delivery touched $85.36, the lowest level since Nov. 16. Prices have fallen 13 percent this year.

Brent oil for January settlement declined 86 cents, or 0.8 percent, to $109.01 a barrel on the London-based ICE Futures Europe exchange.