* U.S. crude and distillate stocks fall, capping oil price
* Promising German data supports sentiment
SINGAPORE, Dec 20 (Reuters) - Brent crude slipped on
Thursday to trade near $110 a barrel as investors took profits
from recent gains after talks to avert a U.S. fiscal crisis
stalled, stoking worries about demand from the world's biggest
As a year-end deadline nears, U.S. President Barack Obama
and House of Representatives Speaker John Boehner remained
locked in intense bargaining over a possible deal to avoid the
so-called fiscal cliff of harsh tax hikes and automatic spending
cuts that could badly damage an already weak economy.
Significant progress seemed to have been made earlier this
week with both Obama and Boehner offering substantial
concessions, but talks turned sour again with Obama accusing
opponents of holding a personal grudge against him while the top
Republican negotiator called the president "irrational".
"Negotiations are (not progressing) which is probably why
we're seeing a sell-off today and the risk sentiment coming
off," said Natalie Rampono, a commodities analyst at ANZ in
Melbourne. "The markets are being directed by sentiment from the
U.S. fiscal cliff talks and so that will have the biggest
influence on prices at the moment."
Brent crude slipped 35 cents to $110.01 a barrel by
0340 GMT, after settling $1.52 higher in the previous session
which was the biggest one-day gain since Nov. 19.
U.S. oil fell 40 cents to $89.58.
While investors still believe the United States will be able
to avert a fiscal crisis, oil prices and other riskier assets
will remain under pressure as the deadline comes closer with no
signs of a deal yet.
However, a patch of promising data from Germany and the
United States kept a floor under prices.
Morale at German businesses climbed in December as their
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.
Also adding to positive sentiment was data showing U.S.
homebuilding permits touched their highest level in nearly 4-1/2
years in November.
Investors are now eyeing weekly U.S. data on jobless claims
due later on Thursday for further clues on the country's
U.S. STOCKS DRAWDOWN SUPPORTS
Oil prices also found early support from a drop in U.S.
crude oil and distillate stocks.
Crude stocks fell by 964,000 barrels to 371.65 million
barrels, compared with an average analyst forecast for a 1.1
million barrel drawdown in a Reuters poll. 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 barrels, versus analyst
expectations for a 1 million-barrel build.
"Oil prices could get a little bit of support ... in the
slight pick up in heating oil demand with the drop in distillate
inventory being greater than expectations ... So if product
prices increase, that could sometimes influence oil market
sentiment," Rampono said.
Oil prices could also be underpinned by a little-noticed
provision in U.S. sanctions against Iran beginning in February
that is likely to trap payments abroad for its oil exports
running into billions of dollars.
The provision could halt most of the flow of petrodollars to
Iran, given that the value of its oil exports is far higher than
what it imports from its biggest customers - China, South Korea,
India and Japan.
Sanctions on financial transactions with Iran have already
made it difficult for buyers to pay for oil from the OPEC
producer, triggering supply worries and supporting oil prices.
(Editing by Himani Sarkar)