FX:Crude Oil Futures Gain on US Fiscal Cliff Deal Optimism
At 1105 GMT, the front-month February Brent contract on London's ICE futures exchange is up 65 cents at $108.29 a barrel.
The front-month January light, sweet crude contract on the New York Mercantile Exchange is trading 50 cents higher at $87.70 a barrel.
"People think the U.S. fiscal cliff talks are going to be sorted, sooner or later. Maybe not until the New Year, but the sentiment is turning," says Tamas Varga, an analyst at PVM in London.
Varga noted that this was "all speculation," though Frans Koster of Energy Intelligence Group wrote: "Republican leader John Boehner has indicated his party will agree to tax hikes on incomes of over $1 million per year, and traders saw this as potentially leading to a deal that would avert broader tax hikes and spending cuts that would kick in from January in the absence of an agreement."
U.S. data are expected to show that oil inventories fell by 900,000 barrels in the week ended Friday, with lower U.S. supplies potentially supporting the price of its crude. The American Petroleum Institute, an industry group, is scheduled to release its survey later Tuesday and a government survey from the EIA is due Wednesday.
The difference has shrunk between the price of Brent crude and that of U.S. WTI, making Brent slightly more competitive.
"Oil futures on the two sides of the Atlantic moved in opposite directions yesterday," wrote analysts at JBC Energy in a note, pointing out that the Brent/WTI spread of $20.44 a barrel at settlement "was the narrowest in almost two months."
The price of WTI is currently being depressed because much of it is landlocked, JBC wrote. This could be alleviated by the expansion of a local pipeline, however.
"The prospect of the Seaway pipeline's capacity being expanded from 135,000 barrels a day at present to 400,000 barrels a day--as has been applied for by the operator Enterprise Product Partners LP for next month--is giving WTI a boost," wrote analysts at Commerzbank in a note.
The pipeline's expansion would allow stocks at Cushing, Okla., to move more easily to Houston, Texas, from where it would be able to access Gulf Coast refineries.
The ICE's gasoil contract for January delivery is up $1.25 at $923.50 a metric ton, while Nymex gasoline for January delivery is up 242 points at 2.6788 cents a gallon.
