Crude-oil futures climbed Monday as investors eyed the possibility that U.S. lawmakers will reach a budget deal, but the market still logged its first loss in four years and faced some economic uncertainty and other concerns for early 2013.
Crude for February delivery rose $1, or 1.1%, to settle at $91.82 a barrel on the New York Mercantile Exchange.
After the close of floor trading, oil edged further toward $92 a barrel in electronic trading after Senate Majority Leader Mitch McConnell said Monday afternoon that lawmakers had reached an agreement on all tax issues related to the so-called fiscal cliff.
The fiscal cliff is a package of tax increases and spending reductions set to begin in the new year. Economists have projected the U.S. could slip back into recession if a deal isn’t reached in time to avert most of the austerity measures contained in the cliff.
For 2012, oil futures fell 7.1% — their first yearly decline since 2008, when markets were rocked by the global financial crisis.
The biggest factor weighing on market were fundamentals, said Darin Newsom, senior analyst at Telvent DTN, with a “continued slowdown in demand for petroleum. We’ve seen gasoline demand come down since 2007,” leading to increased stockpiles of U.S. crude.
“It’s just not allowed the market to do much in 2012,” Newsom said.
More efficient fuel-vehicles and changes in consumer behavior over the past few years have pressured demand, he said.
While oil prices slumped in 2012, the front-month contract still held above $90 a barrel.
Besides the fundamental side of the market, “we’ve also got the investment side, and they’ve certainly worked to keep [oil] supported,” said Newsom. “When they see a market that looks too low, they might jump in short-term.”
Geopolitical risks also “keeps some buyers interested in the market and this level of support in the mid- to upper-$80s to low-$90s — the market just doesn’t want to go below right now,” he said.
Money Morning global energy strategist Kent Moors wrote Saturday that energy markets have been “reacting to market forces, not to political hype.”
The “price of crude oil has been rising over the past week to prices higher than at any point since mid-October. Natural-gas prices have been declining, with a reversal now expected with the first major series of winter storms pummeling the East Coast,” he wrote.
Among other energy futures, February gasoline rose 0.1% to $2.762 a gallon.
February natural gas fell 12 cents, or 3.4%, to $3.35 per million British thermal units, while the March contract fell 12 cents, or 3.4%, to $3.37 per million British thermal units.
February heating oil rose 1 cent to $3.03 a gallon.
For 2012, gasoline gained 2.7%, and natural gas rose 12%. Heating oil this year rose 3.1%.
Source: Carla Mozee and Michael Kitchen, MarketWatch.com