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Crude Gains as Lawmakers Seek Path to Raise Debt Ceiling

West Texas Intermediate crude advanced as U.S. lawmakers took tentative steps toward raising the government’s debt limit and on a forecast that global demand will increase.

Prices increased 0.5 percent. Senate Democrats are planning a test vote before the end of this week on a measure that would grant President Barack Obama authority to raise the $16.7 trillion debt ceiling, probably for a year, unless two-thirds of both chambers of Congress disapprove. The Energy Information Administration increased its forecast for WTI prices and raised its demand estimates.

“There is a sense that they are going to get some type of a deal done,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “But we are not out of the woods yet, and a possible default is still a big concern.”

WTI for November delivery rose 46 cents to settle at $103.49 a barrel on the New York Mercantile Exchange. The volume of all futures traded was about 22 percent below the 100-day average at 2:38 p.m.

Prices were little changed after the American Petroleum Institute reported U.S. crude inventories increased 2.76 million barrels last week. WTI gained 0.5 percent to $103.53 in electronic trading at 4:36 p.m. It was $103.56 before the report was released at 4:30 p.m.

Brent for November settlement advanced 48 cents, or 0.4 percent, to end the day at $110.16 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.2 percent above the 100-day average. The European benchmark was at a premium of $6.67 to WTI, compared with $6.65 yesterday.

Senate Plan

If all Senate Democrats along with six Republicans vote for giving Obama authority, they could send a debt-limit increase without policy conditions to the Republican-controlled House with only a few days to spare before U.S. borrowing authority lapses Oct. 17.

That would put pressure on House Speaker John Boehner, who opposes a clean debt-limit bill. He said on Oct. 6 that the country could end up in default if Obama doesn’t negotiate over the Affordable Care Act, which Republicans want delayed or defunded. Obama insists that no conditions be attached to the debt-limit increase.

“There is an underlying assumption that the U.S. Congress will agree to a budget resolution and raise the debt ceiling to avert a crisis,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in an e-mail.

Default Looms

Obama said in a press conference that he is happy to talk with House Republicans “about anything,” but such negotiations “shouldn’t require hanging the threat of a government shutdown or economic chaos over the heads of the American people.”

A default could have catastrophic consequences that might last decades, the Treasury Department said in a report. The U.S., the world’s biggest oil-consuming country, accounted for a fifth of global demand last year, according to BP Plc (BP/)’s Statistical Review of World Energy.

“If history is an indication, this is not going to get solved until the last moment,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.

Many U.S. government services have been shuttered for a week. The shutdown cost $1.6 billion last week in lost economic output, according to IHS Inc. (IHS), a Lexington, Massachusetts-based global market-research firm.

EIA Forecasts

WTI will average $98.69 a barrel this year, up from the September projection of $98.59, the EIA, the Energy Department’s statistical unit, said today in its monthly Short-Term Energy Outlook. The world’s consumption will be 90.26 million barrels a day this year, up from last month’s estimate of 90.06 million and last year’s demand of 89.29 million.

U.S. crude inventories rose by 1.55 million barrels, or 0.4 percent, to 365.3 million in the week ended Oct. 4, based on the median of 10 analyst estimates before a report tomorrow from the EIA. The total would be the most since July 12.

The Bloomberg survey also showed that gasoline stockpiles increased 1.05 million barrels last week. Inventories of distillate fuel, a category that includes heating oil and diesel, decreased 1.15 million barrels.

“The market seems to be more focused on the expectation that U.S. distillate inventories declined last week than the anticipated builds in both crude oil and gasoline stocks,” Evans said.

Implied volatility for at-the-money WTI options expiring in November was 21.5 percent, up from 20.3 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 442,036 contracts as of 4:36 p.m. It totaled 687,107 contracts yesterday, 15 percent above the three-month average. Open interest was 1.88 million contracts.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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