Oil rose in New York for the first time in three days as President Barack Obama and the U.S. Congress prepared to assemble to discuss a budget solution to meet a year-end deadline.
Prices gained as much as 0.7 percent before Democrats and Republicans plan to convene tomorrow for talks aimed at avoiding more than $600 billion in tax gains and spending cuts, known as the fiscal cliff, which are scheduled to take effect Jan. 1. U.S. crude stockpiles probably fell last week to the lowest in 10 weeks as refineries kept utilization at a high rate and imports decreased, a Bloomberg News survey showed.
“The oil market’s movement depends on the fiscal cliff but I don’t think it will lose ground,” said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo. “In a worst-case scenario the situation may continue as it is now for one month or a few months.”
West Texas Intermediate crude for February delivery climbed as much as 60 cents to $89.21 a barrel in electronic trading on the New York Mercantile Exchange. It was at $89.07 at 4:33 p.m. in Tokyo. Futures slid 5 cents to $88.61 on Dec. 24. Prices have lost 9.9 percent this year.
The volume for all WTI contracts was down 72 percent from the 100-day average. There was no floor or electronic trading yesterday because of the Christmas holiday.
Brent oil for February settlement on the London-based ICE Futures Europe exchange advanced as much as 60 cents, or 0.6 percent, to $109.40 a barrel. The number of contracts trading was 61 percent lower than the 100-day average. The European benchmark crude was at a premium of $20.32 to WTI after closing at $20.29 on Dec. 24.
Japan’s yen slumped to its lowest level since April 2011 and is set for a 3.3 percent decline in December. The currency’s advance to a postwar high last year had eroded the competitiveness of Japan’s exporters and contributed to concern the nation’s manufacturing is hollowing out. The country is the world’s third-largest crude user.
“The Japanese yen has now exceeded about 85 per dollar for the first time in almost 20 months,” Hasegawa said. “That may also be a factor pushing oil markets.”
President Obama plans to leave his Hawaii vacation and return to Washington for the budget talks tomorrow, according to a White House aide who asked not to be identified. Congress will return the same day to continue negotiations on averting the fiscal cliff.
A failure to reach an agreement on the budget plan would push the U.S. into recession for the first half of 2013, the nonpartisan Congressional Budget Office has said. The country is the world’s biggest oil user.
U.S. crude inventories fell 1.7 million barrels, or 0.5 percent, in the week ended Dec. 21 to 370 million, the lowest since Oct. 12, according to the median estimate of nine analysts surveyed before an Energy Department report this week.
Gasoline stockpiles probably rose 700,000 barrels, or 0.3 percent, to 220 million, the Bloomberg survey shows. Supplies gained 2.21 million the previous week to 219.3 million barrels.
Stockpiles of distillate fuel, a category that includes diesel and heating oil, probably decreased 1 million barrels to 116 million, according to the median of responses. Supplies declined 1.09 million barrels the previous week.
The Energy Department is scheduled to release its weekly report at 11 a.m. on Dec. 28 in Washington, two days later than usual due to the Christmas holiday. The industry-funded American Petroleum Institute will publish separate data 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. Brent, the benchmark grade for more than half the world’s crude, has climbed 1.9 percent this year.
Oil is rebounding in New York today as a technical formation signals selling pressure has ceased after the 1.6 percent drop on Dec. 21, according to data compiled by Bloomberg. Futures on Dec. 24 closed 1 cent a barrel above the opening price, creating a cross-shaped candlestick known as a “doji.” This formation typically indicates prices will change direction.