Oil in New York rose on optimism that negotiators will reach a last-minute U.S. budget deal that would avert more than $600 billion of tax increases and spending cuts that threaten economic growth.
Futures climbed as much as 0.9 percent as Democrats and Republicans discussed how to avoid the budget measures known as the fiscal cliff. Gains accelerated as President Barack Obama planned to make a statement on budget negotiations at 1:30 p.m. in Washington. Oil in New York headed for its first annual drop since 2008 as U.S. crude production surged.
“A budget deal would be good for demand,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There’s fundamental strength to the market, and an agreement would be a catalyst for higher prices going into 2013.”
Crude oil for February delivery increased 76 cents, or 0.8 percent, to $91.56 a barrel at 12:51 p.m. on the New York Mercantile Exchange. Prices are down 7.4 percent this year. The volume for West Texas Intermediate oil contracts traded in New York was 62 percent below the 100-day average.
There is no floor trading tomorrow because of the New Year’s Day holiday. Electronic transactions will halt at 5:15 p.m. New York time today and resume at 6 p.m. tomorrow for settlement on Jan. 2.
Brent oil for February settlement rose 35 cents, or 0.3 percent, to $110.97 a barrel on the London-based ICE Futures Europe exchange. The number of contracts trading was 58 percent lower than the 100-day average. Brent has advanced 3.3 percent this year, a fourth annual gain. The European benchmark’s premium to WTI narrowed for a fifth day to $19.41.
WTI has declined in 2012 as the U.S. shale boom deepened a glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for the New York contract. That has left it at an average $17.48 a barrel below Brent this year, compared with a premium of about 95 cents in the 10 years through 2010.
U.S. crude production rose to 6.984 million barrels a day, the highest level since 1993, in the week ended Dec. 21, the Energy Department reported Dec. 28.
The House and Senate met yesterday after Obama on Dec. 28 asked Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell to try to find a solution to the fiscal cliff. Both houses adjourned by mid-evening and reconvened today.
The U.S. and China are the world’s biggest oil-consuming countries, together accounting for 32 percent of global crude demand in 2011, according to BP Plc’s Statistical Review of World Energy.