Oil fell for a second day as U.S. crude inventories were forecast to increase and on concern that a deal for Greece to buy back its bonds may falter.

Prices dropped as much as 1 percent as oil supplies probably grew 350,000 barrels last week, according to analysts surveyed by Bloomberg before an Energy Department report tomorrow. If the Greek emergency aid package agreed to by European finance ministers falls through, it could hold up disbursements of bailout funds to the nation.

In the latest bid to keep the 17-nation euro intact, European finance ministers eased the terms on emergency aid for Greece.

The finance chiefs cut the rates on bailout loans, suspended interest payments for a decade, gave Greece more time to repay and engineered a bond buyback. The country was also cleared to receive a 34.4 billion-euro ($44.7 billion) loan installment in December.

Oil also followed declines in U.S. stocks amid the ongoing budget debate in Washington and concern about the so-called fiscal cliff. Congress returns from the Thanksgiving recess this week, seeking a budget deal to avoid $607 billion of automatic tax increases and spending cuts from kicking in next year.

Crude for January delivery fell to $86.83 a barrel on the New York Mercantile Exchange. Prices are down 12 percent this year.

Brent for January settlement slid $1.31, or 1.2 percent, to $109.61 a barrel on the London-based ICE Futures Europe exchange.