Oil fell for a third day on Monday, trading below $109 a barrel, as uncertainty over the ability of the United States to resolve a budget crisis before a year-end deadline stoked concerns about demand growth in the world's top oil consumer.

The doubts over the U.S. "fiscal cliff" that will trigger harsh spending cuts and tax hikes and threatens to tip the country back into recession further dented investor appetite for riskier assets such as oil.

By 1210 GMT, Brent crude had fallen to $108.45, down 52 cents. U.S. oil slipped 15 cents to $88.51.

"It's all about the U.S. fiscal cliff issue," said Victor Shum, managing director at IHS Purvin & Gertz. "The chances are that we will get a deal between the White House and the Republicans, but the fact that Boehner failed to get members to support his plan is worrying."

Some U.S. lawmakers are voicing concern the country would go over the fiscal cliff. President Barack Obama and Republican House Speaker John Boehner, the key negotiators, are out of town for Christmas. Congress is in recess, and will have only a few days to act before the Jan. 1 deadline.

Given this scenario, investors are now looking at a stop-gap that puts everything off for a while as the most promising alternative. Such a fix may help delay the spending cuts and tax hikes further into 2013 as well as work to address in a long-term way a budget that has generated deficits exceeding $1 trillion in each of the last four years.

 

Oil losses were restrained by tensions in the Middle East.

Dozens of people were killed in an air strike while queuing for bread in Syria's central Hama province on Sunday, activists said, with some residents giving an initial count of 90 dead.

Such a toll, if confirmed, would make it one of the deadliest air strikes in Syria's civil war.

Oil markets have also been on edge through most of the year as tensions between Iran and the West escalated over Tehran's disputed nuclear programme.

Western sanctions on Iran's shipping and energy sectors caused serious problems for its oil industry earlier this year but Iran has mostly overcome those challenges, Oil Minister Rostam Qasemi was quoted as saying on Sunday. (Additional reporting by Manash Goswami in Singapore, Editing by William Hardy)