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NEW YORK, Dec 21 AFP

December 22 2012, 09:51AM

Oil prices have fallen amid worries Washington will not act in time to stop the United States from going over the "fiscal cliff" by an end-of-year deadline.

New York's main contract, West Texas Intermediate (WTI) for February delivery, fell $1.47 cents to settle at $88.66 a barrel on Friday.

Brent North Sea crude for February delivery dipped $1.23 to close at $108.97 a barrel in London trade.

The United States risks falling off the so-called fiscal cliff in the absence of a political compromise to avert a series of tax hikes and spending cuts from taking effect in January.

Experts say going over the cliff could push the world's biggest economy back into recession.

Investors have "real fear of the potential to go off the fiscal cliff," said Robert Yawger of Mizuho Securities USA.

If investor concern mounts "the stock market could slide rather aggressively," he said, adding that he believed crude "will be at the mercy of the equity market".

Crude prices rose earlier in the week on a sharper-than-expected fall in US crude inventories and as lawmakers appeared to make headway on a compromise.

Late on Thursday, however, a Republican plan to let tax breaks expire on US millionaires collapsed when it failed to earn enough party support, leaving talks up in the air.

The tax bid, presented by top Republican John Boehner, was part of an overall offer to President Barack Obama that would raise some $US1 trillion ($A957.99 billion) in tax revenue - mostly through closing loopholes and ending certain deductions - and another $US1 trillion in spending cuts, including slashes to some entitlements like Medicare.

Republican leaders said on Friday they were not walking away from negotiations. Still, a compromise remains elusive.