BLBG: Oil Fluctuates Near Two-Month High on U.S. Budget Talks
Crude fluctuated after rising to the highest level in more than two months as President Barack Obama and the U.S. Senate are returning to Washington today to resume budget negotiations.
Prices erased earlier gains amid few signs of an agreement to avert U.S. tax increases and spending cuts scheduled to begin taking effect in January. Earlier, futures advanced as jobless claims fell and the euro strengthened against the dollar.
“We might have a couple of choppy days,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It hinges on whether we get some kind of agreement in Washington. The jobless claims provide some support to oil and you also have the dollar under pressure.”
Crude oil for February delivery climbed 8 cents to $91.06 a barrel at 9:44 a.m. on the New York Mercantile Exchange after rising to $91.44, the highest intraday level since Oct. 19. Trading volume for West Texas Intermediate futures contracts was down 40 percent from the 100-day average. Prices have dropped 7.9 percent this year.
Brent oil for February settlement slid 15 cents to $110.92 a barrel on the London-based ICE Futures Europe. The number of contracts trading was 50 percent lower than the 100-day average.
The Treasury Department said yesterday it will start taking special measures now to avoid breaking the debt ceiling.
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.
Budget Talks
Mitch McConnell, the Senate minority leader who has stayed largely outside the U.S. budget fight this year, will be thrust into prominence just five days before the deadline for tax increases and spending cuts after the U.S. House of Representatives failed to act.
Last week’s jobless claims were down 12,000 from the previous week and lower than the 360,000 forecast by economists surveyed by Bloomberg. The four-week moving average of claims, a less-volatile measure, dropped to 356,750, the lowest level since March 2008.
The euro gained for a second day after an index of French household sentiment rose to 86 in December from 84 in November, the first monthly increase since May, the national statistics office Insee said.
Europe’s shared currency rose as much as 0.5 percent to $1.3284. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
