Oil falls on concerns about Greece debt, U.S. budget

* European finance ministers struggle with Greek debt deal

* Looming U.S. budget crunch dents confidence

* Nigerian oil output seen lower in January

* Coming up: API oil inventory data 4:30 p.m. EST Tuesday (Adds settlement prices, analysts’ forecast, Nigerian shipments)

By Robert Gibbons and Matthew Robinson

NEW YORK, Nov 26 (Reuters) – Oil prices fell on Monday as concerns about Greek debt talks and U.S. budget negotiations outweighed worries about potential Middle East supply disruptions.

After the U.S. Thanksgiving holiday muted activity late last week, the market dipped in another day of light activity as U.S. lawmakers showed little progress toward a compromise designed to avoid mandated tax increases and government spending cuts scheduled for Jan. 1.

President Barack Obama spoke with congressional leaders over the weekend to avert the looming “fiscal cliff” – tax increases and spending cuts that take effect early next year – that markets fear could cause a recession and further dampen fuel demand.

Traders were also eyeing a third attempt by euro zone finance ministers and the International Monetary Fund to release emergency aid for Greece, with policymakers saying a write-down of Greek debt was off the table for now.

While uncertainty about attempts to address fiscal dilemmas on both sides of the Atlantic put pressure to oil prices, the political crisis in Egypt kept fears about Middle East oil supplies in focus, along with the fragile ceasefire in Gaza and the ongoing conflict in Syria.

“Crude is feeling some pressure from the concerns about Greece and Spain, and the nagging worries about the fiscal cliff, with the stock market lower and the dollar index strengthening adding some pressure,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

In addition to the wider economic worries , U.S. equities markets came under pressure o n c oncerns about retail sales as the holiday shopping season gets into full swing.

Brent January crude fell 46 cents to settle at $110.9 2 a barrel. The international benchmark traded as low as $110.27 and briefly testing support at the 50-day and 100-day moving averages of $110.59 and $100.48 a barrel, respectively. U.S. January crude gave up 54 cents to settle at $87.7 4 a barrel. U.S. gasoline and heating oil futures also fell, with the front month heating oil contract down 1 percent on the day.

Trade for both crude contracts held within Friday’s range as players sought stronger signals to break out of levels seen through most of last week. Vo l umes we re light, wi th Brent trade 45 per cent below the 30-day average and U.S. crude down 48 p erc ent below that average just after the settlement.

Nearly a month after Hurricane Sandy battered the East Coast fuel distribution network, sources said Phillips 66’s 238,000 barrel per day Bayway, New Jersey, r efinery ha d res tarted, potentially helping to ease the region’s supply crunch.

The plant was the last of the refineries impacted by the storm to resume operations after being hit by floodwaters and a power failure.

SUPPLY CONCERN

Crude came off early lows following news that oil shipments from Nigeria – one of the worlds top 10 exporters – would drop to 1.98 million barrels per day in January from 2.12 million bpd in December following a fire, an oil spill and flooding, which have all impacted production.

In addition, violent protests in Egypt over an expansion of the powers of President Mohamed Mursi that could destabilize the region remained in focus. The crisis helped lift prices on Friday.

On Monday, Mursi held negotiations with senior judges to try to defuse the situation. The justice minister said he believed Mursi would agree with Egypt’s highest judicial authority on its proposal to limit the scope of the new powers.

Egyptian mediators began separate talks on Monday with Hamas and with Israel to flesh out details of a ceasefire agreed last week that ended eight days of fighting in the Gaza Strip that had help lift oil prices this month.

Ahead of weekly U.S. inventory data due out on Tuesday and Wednesday, analysts forecast a build in crude and refined product stockpiles for the week to Nov. 23.

(Reporting by Robert Gibbons and Matthew Robinson in New York, Christopher Johnson in London and Jessica Jaganathan in Singapore; Editing by Marguerita Choy, Sofina Mirza-Reid and Andre Grenon)

Source: Reuters