Crude futures closed higher Monday, buoyed by ongoing tensions in the Middle East as well as on optimism about talks to avoid U.S. tax hikes and spending cuts that threaten to send the nation’s economy into recession.
Oil for January delivery rose 47 cents, or 0.5%, to $87.20 a barrel on the New York Mercantile Exchange. The gain extends Friday’s 1% advance that came on the back of encouraging Chinese economic data along with Mideast concerns.
“Really, the fiscal cliff is the primary mover, and the realization that going over, if fixed early in the new year, is not cataclysmic has taken away some of the market-related gyrations,” said Michael Fitzpatrick, editor in chief of the Kilduff Report.
U.S. policy makers have until the end of the year to agree on a budget deal to avert the massive spending cuts and tax hikes that are referred to as the fiscal cliff.
Negotiations appeared to have accelerated on Monday, as President Barack Obama and House Speaker John Boehner met at the White House after Boehner made a new offer on taxes and the U.S. debt ceiling.
What measures, if any, will emerge from Washington “continue to cloud the macro outlook going into 2013, and oil investors would prefer to wait on the sideline until this is resolved before placing large bets,” said Andrey Kryuchenkov, commodities analyst at VTB Capital, in a note.
Developments in the Middle East also provided a favorable backdrop for oil futures to move higher.
Iran’s foreign minister said Monday that the nation’s deadlock with major powers over its nuclear program needs to be resolved, according to Reuters, which cited a report from an Iranian news agency.
In Syria, the nation’s vice president has called for a peaceful resolution to the violence and suggested that President Bashar al-Assad may not play a role in Syria’s future, according to news reports.
Also Monday came a Reuters report that a pipeline that ships crude from Cushing, Okla., to Houston will be expanded to run 400,000 barrels a day as of next month. Enterprise Products Partners LP and Enbridge Inc. also plan a further expansion of the Seaway pipeline to transport 850,000 barrels a day of crude during the first quarter of 2014.
January natural gas gained 4 cents, or 1.3%, to $3.36 per million British thermal units, marking the first rise in eight sessions.
The contract’s selloff from November highs above $4 “has been due to fundamental forces of warmer weather forecasts for the winter, thus potentially limiting the demand for natural gas,” wrote analysts at Lido Isle Advisors, in a note to clients. “However, we believe natural gas is just coming out of oversold conditions and will stay above $3.20.”
Heating oil for January delivery shed 2 cents, or 0.8%, to $2.96 a gallon, and January gasoline gave up 1 cent, or 0.3%, to end at $2.65 a gallon.
Source: Myra P. Saefong and Carla Mozee at www.marketwatch.com