Oil prices rose on Thursday for the first time this week on optimism that US lawmakers will resolve a budget fight to avert an economic slowdown and on increasing Middle East tensions that stoked fear about disruptions to oil supplies. A US budget deal would help avoid what has been called the "fiscal cliff," which could be caused by automatic tax increases and spending cuts.
In recent days, Republican and Democratic lawmakers have expressed optimism that a deal will be reached. US Treasury Secretary Timothy Geithner, the head budget negotiator for President Barack Obama, met with congressional leaders on Thursday, although House Speaker John Boehner, a Republican, said talks have made "no substantive progress."
Oil also rose as the dollar weakened on Thursday against other currencies, making dollar-denominated crude cheaper for holders of other currencies, US equities prices rose, and escalating violence and political tension in Syria and Egypt kept oil traders wary of supply disruptions.
Crude futures pushed higher after three straight lower settlements, putting Brent and US crude futures on pace to post monthly gains of around 2 percent. "The developments in the Middle East keep pumping up the security premium and that is helping push crude higher along with the hopes that a fiscal deal can be reached in Washington," said John Kilduff, partner at hedge fund Again Capital LLC in New York.
Brent January crude oil futures rose $1.25 to settle at $110.76 a barrel topping its 50-day moving average price of $110.58. The international benchmark crude traded as high as $111.30 a barrel during intraday activity, and as low as $109.70 Brent's $111.30 session peak was near a 200-day moving average of $111.47, another technical level monitored by chart watchers. A breach of key moving average levels can sometimes add momentum to trading, propelling prices further.
US January crude oil prices rose $1.58 to settle at $88.07 a barrel 25 cents above the 50-day moving average. Front-month US crude oil futures traded as high as $88.69 a barrel during intraday activity, and as low as $86.55 a barrel. Other commodities also rose on Thursday, with copper, a major economic bellwether, reaching its highest price in more than a month.
President Barack Obama and Boehner, the top Republican in Congress, had both expressed hopes on Wednesday that a budget deal could be reached, though Boehner's comments on Thursday, when he accused Democrats of failing to "get serious" about a deal, were less optimistic.
Data released on Thursday showed the US economy grew faster than initially thought in the third quarter, but consumer and business spending were revised lower in a reminder of the recovery's underlying weakness. Oil output from Opec member countries has declined in November to its lowest since January because of disruptions to Nigerian output and reduced supplies from Angola and Libya, a Reuters survey found on Thursday. Supply from the 12-member Organisation of the Petroleum Exporting Countries has averaged 31.06 million barrels per day (bpd), down from 31.15 million bpd in October, the survey of sources at oil companies, Opec officials and analysts found.
Opec is likely to keep its current output target of 30 million barrels per day when its members meet next month, Opec delegates told Reuters. Embattled Egyptian President Mohamed Morsi was due to address the nation on Thursday and expected to call for national unity even as critics warned the Islamist-dominated assembly's bid to quickly finish writing a new constitution could escalate tensions instead of calming them. The UN nuclear agency made no progress in a year-long push to find out if Iran worked on developing an atomic bomb, its chief said on Thursday, calling for urgent efforts to end Tehran's stand-off with the West.