House Passes Budget to Ease $63 Billion in U.S. Spending Cuts
Oil Advances After Progress on U.S. Budget Agreement
Oil rose for a third day in New York on speculation that an agreement will be reached to avert a U.S. budget impasse that would trigger automatic spending cuts and tax increases next year, sapping demand for fuels.
West Texas Intermediate futures gained as much as 0.8 percent following yesterday’s close at the highest level in almost two weeks. In discussions on the so-called fiscal cliff, President Barack Obama made a new offer after House Speaker John Boehner dropped his opposition to raising tax rates for some top earners. Crude supplies shrank last week while fuel stockpiles rose, according to a Bloomberg News survey before an Energy Department report tomorrow.
“It seems highly like that an acceptable compromise to avert the fiscal cliff will emerge in time,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London.
Crude for January delivery climbed as much as 72 cents to $87.92 a barrel in electronic trading on the New York Mercantile Exchange and was at $87.76 at 1:35 p.m. London time. The contract, which expires tomorrow, rose 47 cents to $87.20 yesterday, the highest close since Dec. 5. The more-actively traded February future advanced 57 cents to $88.24 a barrel.
Brent for February settlement on the London-based ICE Futures Europe exchange gained as much as 82 cents, or 0.8 percent, to $108.46 a barrel. The front-month European benchmark contract was at a $20.10 premium to the corresponding WTI future. The spread was $19.97 yesterday, the narrowest since Oct. 19.
Oil extended gains in New York after rebounding off an upward-sloping trend line on the daily chart connecting the intraday lows of June and November, according to data compiled by Bloomberg. In the short term, crude’s advance may stall along its 50-day moving average, around $87.62 a barrel today. Sell orders tend to be clustered near technical-resistance levels.
The U.S. president’s budget offer would raise taxes by $1.2 trillion and boost tax rates for households earning more than $400,000 a year, up from $250,000, said a person familiar with the talks, who spoke on condition of anonymity. It would reduce federal spending by $1.22 trillion.
Obama and Boehner are negotiating to avert more than $600 billion in tax increases and spending cuts set to start in January that threaten to derail the economic recovery. The U.S. accounted for 21 percent of the world’s oil demand last year, according to BP Plc (BP/)’s Statistical Review of World Energy.
WTI has declined 11 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, Oklahoma, the country’s largest storage hub and the delivery point for New York futures. That has left it at an average discount of $17.40 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 risen 1 percent this year.
The Brent-WTI spread narrowed yesterday in anticipation of the expansion of the Seaway oil pipeline in early January. Enterprise Product Partners LP will boost flows on Seaway, which runs from Cushing to Freeport, Texas, to about 400,000 barrels a day next month from 135,000, according to a filing with the Federal Energy Regulatory Commission. That may reduce the Midwest crude glut and cut oil imports on the Gulf Coast, which holds about 50 percent of U.S. refining capacity.
U.S. crude inventories probably fell 1 million barrels in the week ended Dec. 14, according to the median estimate of seven analysts in the Bloomberg survey. Gasoline supplies may have climbed 1.9 million barrels to the highest level in eight months, while distillate stockpiles, including heating oil and diesel, were up 1 million barrels, the survey showed.
The American Petroleum Institute in Washington will release separate supply data today. The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Separately, data on the Energy Department’s website showed U.S. retail gasoline dropped 2.8 percent from last week to $3.254 a gallon yesterday, the lowest price in a year.
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