Oil rises on optimism for fiscal cliff resolution

Give a Little Bit

Oil prices are back on the rise as it appears that both sides of the fiscal cliff negotiations are willing to give a little bit. Obama met House Speaker John Boehner somewhere in the middle as the President relented on his demand to raise taxes on individuals earning more than $200,000 and families making more than $250,000 and is now offering  to raise it to those making $400,000 and more. That comes on the day after the Speaker Boehner offer included $1 trillion in higher tax revenue over 10 years and to raise taxes on incomes over $1 million and a one-year extension of the nation’s borrowing limit with the requirement that the president accept $1 trillion in spending cuts.

The markets believe that a deal is in the works and that would be very bullish. If the cliff is avoided the market will focus on global stimulus and the prospects for demand. That should target oil back up into the mid-$90s and help bring back the funds that exited the markets instead of facing the cliff and the upcoming holidays.

In the meantime, we are seeing more movement to get the new shale oil out of Cushing, Oklahoma and to the places that it is needed. As reported by Bloomberg News, "Enterprise Products Partners LP expects to begin operating the expanded Seaway oil pipeline in early January, according to a notice filed with Federal Energy Regulatory Commission. The company doesn’t know the exact in-service date of the expansion, which will increase flows to about 400,000 barrels a day, depending on the mix of crude grades transported, from 135,000 barrels."

Gas prices hit the lowest level of the year just in time for the holiday. Barring any major hurricanes or wars, the high price you paid this year may be the highest price you ever pay. A story you can tell your grandchildren.

In other markets, the day after a record soybean crush, bean prices are falling due to rain in Brazil. Beans have been performing well but reversed course in the early morning hours. Sugar has been rallying on the prospects for better ethanol demand. Yet ethanol futures slid on weak corn prices.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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