Oil traded near the highest level in two months as U.S. lawmakers prepared to resume budget talks and the United Arab Emirates said it arrested members of a terror cell that was planning attacks on crude-exporting nations. Futures were little changed in New York after rising the most in five weeks yesterday. U.S. Treasury Secretary Timothy F. Geithner said he will take “extraordinary measures� to postpone a debt default, while President Barack Obama and Congress returned to Washington for talks aimed at averting more than $600 billion in tax increases and spending cuts that start Jan. 1. The U.A.E. coordinated with Saudi Arabian officials to arrest members of the terror group who had the equipment for their attacks, according to the official WAM news agency. “I think there can be some resolution and we can avoid the worst-case scenario� in the budget talks, said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo who predicts West Texas Intermediate oil will trade from $88 to $93 a barrel. “We don’t see an issue for the terrorist news, but it was said to move prices on possible Middle East tension. It’s easier for players to move prices up and down in a thin market.� WTI for February delivery was at $91.07 a barrel, up 9 cents, in electronic trading on the New York Mercantile Exchange at 4 p.m. in Singapore. The volume traded for all contracts was 25 percent below the 100-day average. Futures advanced $2.37 to $90.98 yesterday, the highest close since Oct. 18. Brent oil for February settlement fell 11 cents to $110.96 a barrel on the London-based ICE Futures Europe exchange. The volume was 30 percent less than the 100-day average. Prices yesterday gained $2.27, or 2.1 percent. The European benchmark crude was at a premium of $19.89 a barrel to WTI. Budget Talks A failure to reach an agreement on the budget plan might push the U.S., the world’s biggest crude consumer, into recession for the first half of 2013, the nonpartisan Congressional Budget Office has said. The government will hit its statutory debt ceiling on Dec. 31, Geithner said in a letter to congressional leaders. To avert a default, the Treasury will create about $200 billion in headroom under the debt limit, which would normally last about two months. The letter adds urgency to the talks between congressional Republicans and Obama, who has asked that raising the debt ceiling be part of a deficit-reduction plan. Technical Indicators Oil may decline in New York as technical indicators show prices have probably risen too quickly for further gains to be sustained. Crude’s 30-day stochastic oscillators climbed above 70 yesterday for the first time since September, signaling futures are overbought, according to data compiled by Bloomberg. The front-month contract also settled higher than the upper Bollinger Band, around $90.70 a barrel today, an indicator that has halted advances twice this month. Heating oil futures rose 0.2 percent to $3.056 a gallon in New York after increasing 1.6 percent yesterday, the biggest gain in more than five weeks. A winter storm may have dropped as much as 3 inches (7.6 centimeters) of snow and ice on New York City yesterday. A weather advisory was issued as the system neared the area, said Tim Morrin, a National Weather Service meteorologist in Upton, New York. The storm has dumped heavy snow across the Great Plains and Midwest and brought high winds and tornadoes across the South. Oil held on to yesterday’s gains because “it’s got a lot to do with a little bit of weather,� said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. Gasoline Demand U.S. gasoline demand rose 4.5 percent last week, according to data from MasterCard Inc. (MA) Drivers bought 8.95 million barrels a day of the fuel in the week ended Dec. 21, the company’s SpendingPulse report showed. Consumption the prior week was 8.56 million barrels a day. WTI has dropped 7.8 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That has left it at an average discount of $17.46 a barrel to Brent this year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has climbed 3.4 percent this year. To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Jacob Adelman in Tokyo at jadelman1@bloomberg.net To contact the editor responsible for this story: Paul Gordon at pgordon6@bloomberg.net

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