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Gasoline Futures Gain in N.Y. on Optimism for U.S. Budget Deal

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Dec. 31 (Bloomberg) -- Gasoline rose, capping a fourth consecutive yearly advance, on speculation negotiators will reach a last-minute U.S. budget deal, helping to prevent a dip in demand for the motor fuel.

Futures rose 0.4 percent as Congress works to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start tomorrow. President Barack Obama said a deal is within sight, though it hasn’t yet been completed.

“The market has been see-sawing but seems to be turning around because there is some sense of optimism that a deal might be made,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said in a phone interview today.

Gasoline for January delivery climbed 1.21 cents to settle at $2.812 a gallon on the New York Mercantile Exchange. Prices rose 4.7 percent in 2012 and 1.8 percent in December, while dropping 16 percent in the fourth quarter. Volume was 60 percent below the average of the past 100 days.

The more actively traded February contract gained 0.32 cent to $2.7617 a gallon. January gasoline and heating oil contracts expired at the close of floor trading today.

If no deal is struck, the changes would cause a recession in the first half of 2013, according to the Congressional Budget Office. That may further depress gasoline demand, which during the four weeks ended Dec. 28 was down 2.8 percent from the same period a year earlier.

Fiscal Cliff

“The market is looking at the fiscal cliff and thinking whatever agreement comes to pass is going to be a mini deal which doesn’t address the fundamental problems in the country,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If we do go off the fiscal cliff and taxes rise, people will have less money to spend, which impacts gasoline demand.”

Heating oil for January delivery added 0.03 cent to $3.0451 a gallon, boosting this year’s advance to 3.8 percent. Prices were up 0.1 percent this month and down 3.9 percent in the fourth quarter.

The February contract rose 1.05 cents to $3.0318 a gallon. Volume was 47 percent below average.

The retail price for regular gasoline was unchanged at $3.292 a gallon, AAA said today on its website. Prices averaged a record $3.60 a gallon in 2012, according to Heathrow, Florida-based AAA, the nation’s largest motoring group.

Prices next year will probably be less than in 2012 because of increasing domestic crude production and lower demand, Avery Ash, a spokesman for AAA, said in an e-mailed statement.

To contact the reporters on this story: Aaron Clark in New York at aclark27@bloomberg.net; Christine Harvey in New York at charvey32@bloomberg.net

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

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