Oil price up as budget meeting nears

OIL rose in New York for the first time in three days as President Barack Obama and the US Congress prepared to assemble to discuss a budget solution to meet a year-end deadline.

OIL rose in New York for the first time in three days as President Barack Obama and the US Congress prepared to assemble to discuss a budget solution to meet a year-end deadline.

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.

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