Oil fell below $110 a barrel in choppy trading on Thursday as investors weighed mixed U.S. economic data against a backdrop of ongoing U.S. budget talks, which have stoked concerns about the outlook for the world's largest oil consumer.
U.S. GDP growth for the third quarter of this year was revised higher to 3.1 percent from 2.7 percent previously, but an initial report on U.S. jobless claims showed a slightly larger increase in unemployment than traders and analysts had anticipated.
Brent crude slipped 53 cents to $109.83 a barrel by 1347 GMT, after settling $1.52 higher in the previous session, the biggest one-day gain since Nov. 19. The front-month contract tested the 200-day moving average of $110.31 earlier in the session, touching a high for the day of $110.47.
U.S. oil fell 59 cents to $89.39, threatening to snap four straight days of gains.
The conflict over the so-called U.S. "fiscal cliff" talks is expected to grow more heated as the action shifts to the floor of the U.S. House of Representatives for the first time.
U.S. President Barack Obama has accused opponents of holding a personal grudge against him, while the top Republican negotiator John Boehner called the president "irrational".
"I don't think there has been a material shift in position. There is going to be some sort of muddle-through agreement," said Jack Pollard, commodities research analyst at Sucden.
"At the moment we're subject to some political posturing, and as a result we have the oil markets moving with the ebb and flow of the headlines."
Oil prices and other riskier assets will remain under pressure as the deadline for a budget agreement at the end of the year comes closer with no sign of a deal yet.
A patch of promising data from Germany kept a floor under prices, however.
Morale within German businesses climbed in December as confidence in the outlook rose at its fastest rate in 2-1/2 years, boosting hopes Europe's largest economy will bounce back quickly after a weak end to 2012.
U.S. STOCKS DRAWDOWN SUPPORTS
Oil prices found early support from a drop in U.S. crude oil and distillate stocks reported on Wednesday.
Crude stocks fell by 964,000 barrels to 371.65 million barrels, compared with an average forecast for a 1.1 million barrel drawdown in a Reuters poll of analysts. Crude imports fell 101,000 barrels per day (bpd) to 8.36 million bpd.
Distillates, which include diesel and heating oil, fell 1.09 million barrels to 116.97 million, versus expectations for a 1 million barrel build.
In the Middle East, oil shipments from autonomous Iraqi region Kurdistan have fallen to around 5,000 bpd from around 30,000 bpd at the start of the week, Iraqi oil officials said without giving a reason for the decline. (Additional reporting by Jessica Jaganathan in Singapore, Shadia Nasralla and David Sheppard in London; Editing by Alison Birrane)