Oil rose in New York, heading for the highest close in three months, after the U.S. House passed a Senate-approved deal that will avert tax increases and spending cuts that threatened growth in the world’s biggest economy.
Futures increased as much as 0.9 percent after rallying 1.1 percent Dec. 31. The legislation to avoid the so-called fiscal cliff was passed by a vote of 257-167 in the House today after Republicans abandoned an effort to add spending cuts to the Senate’s plan. A government gauge of China’s manufacturing showed a third month of expansion yesterday, a sign that the recovery in the world’s second-biggest oil consumer will extend to this year.
“Now that the deal is through it’s no surprise that oil is trading higher,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney, who predicts West Texas Intermediate may reach $100 a barrel this month. “We’re clearly seeing a modest expansion in manufacturing in China. That speaks directly to global oil demand.”
Crude for February delivery rose as much as 86 cents to $92.68 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.66 at 1:20 p.m. in Singapore. A close at that price would be the highest since Sept. 21. Oil rose $1.02 to $91.82 on Dec. 31, the highest since Oct. 18. West Texas prices dropped 7.1 percent last year and 0.4 percent in the fourth quarter.
Trading was closed Jan. 1 for the New Year holiday. The number of contracts changing hands was 96 percent more than the 100-day average.
Brent oil for February settlement rose 66 cents, or 0.6 percent, to $111.77 a barrel on the London-based ICE Futures Europe exchange. Volumes are 70 percent higher than the 100-day average. Brent advanced 3.5 percent in 2012, a fourth annual gain. It slipped 1.1 percent in the fourth quarter.
West Texas Intermediate oil slid in 2012 as the U.S. shale boom deepened a glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for the New York contract. That left it at an average $17.48 a barrel below Brent last year, compared with a premium of about 95 cents in the 10 years through 2010. The difference was $19.11 a barrel today.
The bipartisan agreement breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts set to begin taking effect today. The Senate passed the bill early Jan. 1 by a 89-8 vote and President Barack Obama said he will sign the legislation.
“This law is just one step in the broader effort to strengthen our economy,”Obama said at White House after the House vote.
China’s Purchasing Managers’ Index was 50.6 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. That compares with the 51 median estimate in a Bloomberg News survey of 27 analysts and 50.6 in November. A reading above 50 indicates expansion.
A report later today may show U.S. factories produced more last month. The Institute for Supply Management’s manufacturing index probably rose to 50.4 in December from 49.5 the prior month, according to a Bloomberg survey.
Oil’s rally in New York may stall as futures reach technical resistance, a level where sell orders are typically clustered. Crude’s 200-day moving average is around $91.90 a barrel, coinciding with the upper Bollinger Band, according to data compiled by Bloomberg. The 14-day relative strength index has also risen to 66.8, the highest since mid-September. A reading above 70 signals prices may have climbed too quickly.