Gasoline jumped to a 10-week high as President Barack Obama will cut short his vacation to return to Washington tomorrow for budget talks.
Futures rose 2.4 percent, the most in six weeks, as Congress will also return to session tomorrow to continue discussions five days before a deadline to strike a deal to avoid automatic spending cuts and tax increases known as the fiscal cliff. Negotiations before the Christmas holiday ended in an impasse.
“The market was surprised that President Obama cut short his vacation to return to Washington for more negotiations and is optimistic that some deal will come to pass,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Gasoline for January delivery rose 6.52 cents to $2.8158 a gallon on the New York Mercantile Exchange, the highest settlement since Oct. 16 and largest increase since Nov. 9. Prices are up 4.8 percent this year.
Gasoline volume was 54 percent below the average of the past 100 days. Heating oil volume was 55 percent below average.
“The lighter volume does exaggerate moves, but that doesn’t mean the moves won’t be sustained,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
If Obama and Congress don’t strike a deal, more than $600 billion in tax increases and spending cuts will automatically take effect Jan. 1, threatening to cause the economy to slip into a recession.
“That is what has triggered the price gain, but just because they’re returning doesn’t mean anybody has changed their minds,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
The Energy Department is scheduled to report last week’s inventories at 11 a.m. on Dec. 28, two days later than usual because of the Christmas holiday. The department will probably report that gasoline stockpiles rose 700,000 barrels and distillate supplies declined 1 million barrels, according to the median estimate of nine analysts in a survey by Bloomberg.
Heating oil for January delivery climbed 4.91 cents, or 1.6 percent, to settle at $3.0513 a gallon on the exchange, extending this year’s increase to 4 percent.
The average nationwide cost for regular gasoline was unchanged at $3.247 a gallon, AAA said today on its website.