Oil price up as budget meeting nears
Prices rose as much as 0.7 per cent before Democrats and Republicans planned reconvening on Thursday to discuss avoiding more than $US600 billion in tax gains and spending cuts, known as the fiscal cliff, scheduled to take effect on January 1.
US oil stockpiles probably fell last week to the lowest in 10 weeks as refineries kept use high and imports fell, a Bloomberg 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 rose as much as US60¢ to $US89.21 a barrel in electronic trading on the New York Mercantile Exchange. The volume for all WTI contracts was down 72 per cent from the 100-day average. There was no floor or electronic trading on Christmas Day.
Brent oil for February settlement on the London-based ICE Futures Europe exchange was up US48¢ at $US109.28 a barrel. The number of contracts trading was 50 per cent lower than the 100-day average.
Japan's yen slumped to its lowest since April 2011 and is set for a 3.3 per cent decline in December. A weaker currency boosts overseas earnings when repatriated, which could lift the economy of the world's third-biggest crude user.
"The Japanese yen has now exceeded about 85 per dollar for the first time in almost 20 months," Mr Hasegawa said.
"That may also be a factor pushing oil markets."
US crude supplies declined 1.7 million barrels, or 0.5 per cent, in the week ended December 21 to 370 million, the least since October 12, according to the median of nine analyst estimates surveyed before an Energy Department report this week.
Frequently Asked Questions about this Article…
Oil prices rose as much as 0.7% in New York as investors awaited US budget talks to avoid the so‑called fiscal cliff. Market support also came from signs US crude stockpiles probably fell and refineries were running high, helping lift prices in electronic trading.
The fiscal cliff refers to more than US$600 billion in tax increases and spending cuts scheduled to take effect on January 1. Uncertainty around whether lawmakers will reach a deal can influence oil prices because it affects economic growth expectations and demand forecasts — analysts in the article said the oil market's movement depends on the fiscal cliff.
A Bloomberg survey showed US oil stockpiles probably fell to their lowest in 10 weeks as refineries kept utilization high and imports dropped. The article also cited an estimated decline of 1.7 million barrels to about 370 million — lower inventories can signal tighter supply and support higher oil prices, which is important for energy market observers.
West Texas Intermediate for February delivery rose as much as US$0.60 to US$89.21 a barrel in New York electronic trading, with total WTI contract volume down about 72% from the 100‑day average. Brent for February settled up about US$0.48 at US$109.28 a barrel, with trading roughly 50% lower than the 100‑day average.
The article noted the yen slumped to its weakest since April 2011 and was set for a roughly 3.3% decline in December. A weaker yen can boost Japanese exporters' repatriated earnings and may support economic activity in Japan — the world's third‑largest crude user — which in turn can be a factor pushing oil markets higher.
Ken Hasegawa, an energy trading manager quoted in the article, said the oil market depends on the fiscal cliff but he didn't expect prices to lose ground. In a worst‑case scenario he suggested the situation might persist for a month or a few months, implying short‑term uncertainty rather than a decisive drop.
Trading volumes were substantially lower around the holiday period — WTI volume was down about 72% and Brent contracts about 50% versus their 100‑day averages, and there was no floor or electronic trading on Christmas Day. Lower volume can mean less liquidity and potentially greater price swings on smaller orders, so investors should be aware that holiday trading can produce atypical moves.
The article referenced a median of nine analyst estimates surveyed ahead of an Energy Department report scheduled that week. Investors looking for official US crude supply numbers should watch the Energy Department's inventory report for confirmation of the survey estimates.
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