The price of oil drifted further below $89 a barrel on Monday in subdued holiday-thinned trading and amid ongoing concerns over the U.S. budget.
By early afternoon in Europe, benchmark oil for February delivery was down 16 cents to $88.50 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.47 Friday to finish at $88.66 per barrel in New York, the contract's lowest point in three weeks. It dropped to $87.96 per barrel at one point Friday.
"With politicians out on recess, sovereign credit markets closed and a general lack of vigor in seasonal markets, there's not much to chew on today with crude oil prices edging lower in decidedly thin volume," said a report from Sucden Financial Research in London.
When trading resumes after the Christmas break, the focus across all financial markets will likely remain on the budget discussions between the White House and Congress. If they don't reach a deal by Jan. 1, steep tax increases and government spending cuts will automatically take effect — the so-called "fiscal cliff" — that will jar the U.S. economy and potentially throw it into recession. Oil prices tend to drop when concerns over the state of one of the world's major economies arise as it could reduce demand for energy.
A weaker dollar helped keep oil prices from a sharper fall by making crude cheaper — and a more attractive investment — for traders using other currencies. The euro was up to $1.3231 on Monday from $1.3184 on Friday.
Brent crude, used to price international varieties of oil, was down 70 cents to $108.27 per barrel in London.
In other energy futures trading on the New York Mercantile Exchange:
— Natural gas retreated 9.2 cents to $3.359 per 1,000 cubic feet.
— Heating oil lost 1.14 cents to $2.9988 a gallon.
— Wholesale gasoline fell 1.18 cents to $2.704 a gallon.
Pamela Sampson in Bangkok contributed to this report.