WTI Crude Climbs After U.S. Senate Reaches Budget Accord

West Texas Intermediate crude rose after Senate leaders reached a deal to increase the U.S. debt ceiling and end the government shutdown.

Futures gained 1.1 percent on the agreement between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell that will extend U.S. borrowing authority, which would otherwise lapse tomorrow. House Speaker John Boehner, a Republican, said in a statement that his party won’t block the Senate compromise. Both houses plan to vote on the deal later today. The biggest remaining question is how quickly the deal could become law.

“The Senate agreement and signals that it will be allowed on the House floor are sending prices higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We should continue moving higher unless there’s a headline pointing to the House Republicans not allowing a vote.”

WTI crude for November delivery climbed $1.08 to settle at $102.29 a barrel on the New York Mercantile Exchange. The contract declined 1.2 percent to $101.21 yesterday, the lowest settlement since July 2. The volume of all futures traded was 25 percent above the 100-day average at 4:37 p.m.

Price gains eased after the American Petroleum Institute reported inventories rose 5.94 million barrels last week. The November contract advanced 99 cents, or 1 percent, to $102.20 a barrel in electronic trading at 4:39 p.m. It was at $102.24 before the report was released at 4:30 p.m.

Brent Contract

Brent oil for November settlement, which expired today, increased 90 cents, or 0.8 percent, to end the session at $110.86 a barrel on the London-based ICE Futures Europe exchange. The more-active December contract gained $1.17, or 1.1 percent to $110.59. Volume was 7.5 percent higher than the 100-day average.

The front-month European benchmark traded at a $8.57 premium to WTI at today’s close, down from $8.75 yesterday.

The agreement reached by Reid, a Nevada Democrat, and McConnell, a Kentucky Republican, will fund the government through Jan. 15 and suspend the debt limit to Feb. 7, 15, setting up another confrontations then.

The Standard & Poor’s 500 Index and the Dow Jones Industrial Average surged 1.4 percent.

Moving Together

“Equities and crude oil are moving in lockstep,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “As equity prices push high, you start to see crude move up as well.”

The accord was unveiled a day after Fitch Ratings put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner, according to a statement after New York markets closed. The U.S. will account for 21 percent of global oil demand this year, according to the International Energy Agency.

“Negative revisions to both U.S. and global GDP are likely as a result of the fiasco in Washington,” said Michael Peterson, managing director and senior equity analyst at MLV & Co. in Houston.

Four of the 12 Federal Reserve districts reported slower growth while eight others said the expansion held steady amid “uncertainty” stemming from the U.S. fiscal deadlock, the central bank said today. Growth remained “modest to moderate,” the Fed said today in its Beige Book business survey.

Government Data

The U.S. Energy Information Administration won’t release weekly inventory data this week because of the government shutdown. The EIA is the Energy Department’s statistical arm.

“The EIA has halted operations, which will make it more difficult to look at what’s going on in the U.S. oil market in the short term,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “We still have market prices and the API to look at.”

Iran and world powers will hold another round of negotiations next month, a sign that compromises offered by the country over its nuclear program are being taken seriously.

A new round of talks will take place on Nov. 7-8, the sides said in a statement issued after two days of meetings in Geneva. While European Union foreign policy chief Catherine Ashton and Iranian Foreign Minister Mohammad Javad Zarif said they wouldn’t be revealing details of the discussions, both underscored a changed atmosphere from previous negotiations.

Geneva Talks

The discussions in Geneva were the first since Iran’s new president, Hassan Rouhani, and President Barack Obama spoke by phone last month in the highest-level contact between the countries since the 1979 Islamic Revolution.

Sanctions imposed over the nuclear program have hindered Iran’s ability to export oil. Iran, the Organization of Petroleum Exporting Countries’ second-biggest producer in June 2012, was in sixth place last month, according to a Bloomberg survey of companies, producers and analysts.

Implied volatility for at-the-money WTI options expiring in December was 20.6 percent, down from 21.6 percent from yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 701,774 contracts as of 4:38 p.m. It totaled 593,836 contracts yesterday, 2.6 percent higher than the three-month average. Open interest was 1.82 million contracts, the least since Aug. 22.

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