Oil advanced to a two-month high in New York as the dollar slipped against the euro and President Barack Obama planned to leave for Washington to resume talks to avert spending cuts and tax gains that threaten the economy.
Crude rose 2.7 percent and the dollar approached an eight- month low against the euro before lawmakers return to discuss ways to avoid more than $600 billion in automatic measures that will take effect Jan. 1. Gains accelerated after United Arab Emirates security forces arrested members of a cell that was planning to carry out terrorist attacks.
“The dollar is getting hit, which is having an impact on all of the commodities, especially oil,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The euro is back above $1.32, an important level. Oil is also getting a boost from some of the stories about terror threats.”
Crude oil for February delivery climbed $2.37 to $90.98 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 18. Trading volume for West Texas Intermediate futures contracts was down 33 percent from the 100- day average. Prices have dropped 7.9 percent this year.
There was no floor or electronic trading yesterday because of the Christmas holiday.
Brent oil for February settlement rose $2.27, or 2.1 percent, to $111.07 a barrel on the London-based ICE Futures Europe. The number of contracts trading was 70 percent lower than the 100-day average. The European benchmark crude was at a premium of $20.09 to WTI, down from $20.19 on Dec. 24.
Oil in New York topped the 100-day moving average for the first time since Oct. 22. The average was $90.68 today. Technical analysts use historical patterns and tools such as moving averages to predict price movements.
“We were poised technically for this gain after Monday’s session,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Trading volume was very light until 9 a.m. when it picked up with the open of floor trading. The target was the 100-day moving average of $90.68 and we made it.”
Obama planned to leave for Washington today from his Christmas vacation in Hawaii, while his family will stay behind, the White House said yesterday. Lawmakers plan to return tomorrow, the same day Obama will arrive in Washington.
“The president has come back early and that has raised hopes,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “It’s probably a knee-jerk reaction because I don’t know who he has to negotiate with.”
A failure to reach an agreement on the budget plan might push the U.S. into recession for the first half of 2013, the nonpartisan Congressional Budget Office has said.
The dollar fell as much as 0.5 percent to $1.3254 per euro. A weaker dollar increases the appeal of dollar-denominated commodities as an investment. The Standard & Poor’s GSCI Index of 24 raw materials rose as much as 1.7 percent, led by gains in crude oil and gasoline.
UAE officials said members of the group had obtained equipment and materials to carry out their attacks, according to WAM, the country’s official news agency. Saudi Arabia assisted in uncovering the terrorist cell, WAM said.
Security forces arrested “a cell from the deviant group, comprising citizens from both countries, that was planning on carrying out actions that infringe on the national security of both countries and sisterly nations,” the news agency said.
An Iranian Foreign Ministry spokesman, Ramin Mehmanparast, said the six-nation Gulf Cooperation Council is risking a regional crisis because of “irresponsible” criticism and its heightened military focus, according to a report published by the state-run Mehr news agency today.
The GCC will coordinate military forces, Bahrain’s Foreign Minister Sheikh Khalid Bin Ahmed Al-Khalifa said this week. Khalid also said Iran’s nuclear program is a “very serious” threat. The council, includes the UAE, Saudi Arabia, Kuwait, Oman, Bahrain and Qatar. Arab nations in the Persian Gulf, home to three fifths of the world’s oil reserves.
U.S. crude inventories fell 1.7 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg before an Energy Department report.
The department is scheduled to release its weekly data at 11 a.m. on Dec. 28 in Washington, two days later than usual because of Christmas. The industry-funded American Petroleum Institute will publish its stockpile figures tomorrow.
WTI has fallen 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 $17.45 a barrel to Brent this year, compared with a premium of about 7 cents in the five years through 2010.
Electronic trading volume on the Nymex was 288,642 contracts as of 2:38 p.m. Volume totaled 77,204 contracts on Dec. 24, the lowest level since January 2007. Open interest was 1.48 million, the lowest level since Nov. 19.
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