SINGAPORE (Dow Jones)--Crude futures prices held on to early gains in Asia trading Monday as lawmakers reached an agreement to raise the U.S. debt ceiling, easing concerns about a potential credit downgrade or default for the world's largest economy.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September traded at $97.47 a barrel at 0716 GMT, up $1.77 in the Globex electronic session. September Brent crude on London's ICE Futures exchange rose $2.70 to $119.44 a barrel.
Both the U.S. House and Senate were expected to meet Monday to discuss the details of the plan, which calls for increasing the debt ceiling by at least $2.1 trillion through the end of 2012, along with $2.4 trillion in deficit reduction measures.
Congressional aides said the plan would raise the debt ceiling by $2.4 trillion in two stages and provide initially for roughly $900 billion in spending cuts over 10 years. A special committee of lawmakers would be charged with finding another $1.5 trillion in deficit reduction, possibly through a tax overhaul and changes to safety-net programs.
Analysts warned the rally in crude may run out of steam soon, even if the deal is passed, as U.S. economic fundamentals remain weak.
U.S. economic growth is still sluggish, indicating slowing demand in the world's top oil consumer. The Commerce Department last week said gross domestic product grew at a weaker-than-expected rate of 1.3% in the April-June period, while revising the first-quarter growth sharply down to 0.4% from its earlier estimate of 1.9%.
Nymex will likely stay within its recent range between $95 and $102 a barrel, as many players had expected a debt deal and factored this into prices, said Tokyo-based Newedge Japan commodity and derivatives sales manager Ken Hasegawa.
Investors have largely overlooked Tropical Storm Don, whose impact on crude production in the U.S. Gulf area proved to be limited.
Only 6% of oil production and 3.5% of natural-gas production in the Gulf remained shut in Sunday, indicating that producers are ramping up output gradually and that facilities likely weren't damaged by the relatively weak storm.
Nymex reformulated gasoline blendstock for September--the benchmark gasoline contract--rose 566 points to $3.1145 a gallon, while September heating oil traded at $3.1766, 772 points higher.
ICE gasoil for August changed hands at $993.75 a metric ton, up $22.75 from Friday's settlement.
-By Max Lin, Dow Jones Newswires; 65-6415-4063; max.lin@dowjones.com
