UPDATE 7-Oil jumps to nine-week high on US fiscal talks, technicals

Thu Dec 27, 2012 2:54am IST

* Oil rises on fiscal cliff talks optimism, U.S. cold snap
    * U.S. budget talks to resume Thursday as Obama returns from
trip
    * UAE arrests citizens allegedly planning attacks in UAE,
Saudi Arabia
    * Traders cite technicals for oil's rise after 100-day
moving ave breach

 (Recasts, updates prices)
    By Joshua Schneyer
    NEW YORK, Dec 26 (Reuters) - U.S. oil futures rose to the
highest in more than nine weeks on Wednesday on hopes that
renewed talks will prevent a U.S. fiscal crisis, and as cold
weather and technical buying added to the upward momentum. 
    U.S. crude for February delivery rose by 2.7 percent
to settle at $90.98 per barrel, and reached its highest intraday
level since October 19. Brent rose 2.1 percent to settle
at $111.07. Volumes were thin with some traders absent during
the U.S. holiday season. U.K. markets were shut on Wednesday for
Boxing Day.  
    President Barack Obama's will cut short a vacation to return
to Washington on Thursday and hold budget talks aimed at
averting the so-called fiscal cliff, a series of automatic tax
increases and government spending cuts. The measures would take
effect next week if the administration and lawmakers are unable
to reach a deal. 
    Forecasts for temperatures at below seasonal norms also
helped boost oil prices, since a cold snap can raise demand for
products like heating oil. Commodity Weather Group expects a
cold pattern to continue for most of the United States for the
next 10 days. 
    Technical buying also helped boost U.S. oil futures, which
extended gains on Wednesday after breaking through a 100-day
moving average for the first time since October. That move could
set up a test of the 200-day mark at $92.20 a barrel, traders
said.
    "The market is taking advantage of thin holiday trading,
boosting out of its trading range. It's thin volumes and
technical trading," said Addison Armstrong, director of market
research at Tradition Energy in Stamford, Connecticut.
    Some traders attributed gains in part to news that OPEC
member country the United Arab Emirates said on Wednesday it had
arrested a "cell" of UAE and Saudi Arabian nationals who were
allegedly planning to carry out attacks in both countries, which
hold some of the world's largest oil fields.  
    Traders have been placing a premium on oil for months due to
geopolitical tensions in the Middle East. 
    Crude also rose due to buying at a key technical support
level above $90 a barrel, and possible algorithmic
short-covering, traders said. Oil prices rose in spite of a
modest drop for U.S. equities prices, as the S&P 500 index fell
by 0.3 percent.  
    A slight weakening of the U.S. dollar, which fell 0.05
percent against a basket of foreign currencies also
helped push crude higher, they said. A weaker dollar can make
commodities cheaper for holders of foreign currencies. 
    Oil markets had been mostly flat on Monday, the last trading
day before Christmas. Prices had dropped by more than 1 percent
on Friday after U.S. fiscal talks Last broke down.
    
    PRODUCT PRICES RISE 
    Heating oil prices, which have tumbled relative to
crude over the past two months due to unusually warm winter
conditions, tracked crude's gains on Wednesday, rising by 1.7
percent.
    Gasoline futures rose 2.3 percent to extend a
three-week rally as traders anticipated refinery maintenance
that will constrict supplies in the U.S. Northeast.
    
     
 
    JAPAN STIMULUS
    Oil was also supported by expectations Japan's new prime
minister will pursue drastic stimulus policies to drive the
economy of the world's third-largest oil consumer out of
deflation. 
    Shinzo Abe was voted in as prime minister by parliament's
lower house on Wednesday, giving the hawkish lawmaker a second
chance at Japan's top job. 
    


 (Additional reporting by Jonathan Leff and Jeanine Prezioso in
New York, Jessica Jaganathan in Singapore and Dmitri Zhdannikov
in London. Editing by Dale Hudson, Jane Baird and Andrew Hay)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Record Highs

Record Highs

BSE Sensex, Nifty hit record highs, insurers gain  Full Article 

Global Growth

Global Growth

IMF cuts outlook, warns of stagnation risk in rich nations  Full Article 

Monsoon Revives

Monsoon Revives

Monsoon revival keeps rain above average   Full Article 

Wipro Results

Wipro Results

Firm sees strong sales growth, eyes Europe deals   Full Article 

Scourge of Inflation

Scourge of Inflation

Markets' post-election enthusiasm lost on consumers  Full Article 

Just Not Enough

Just Not Enough

Amazon's smartphone fails to kindle a "Fire" among reviewers.  Full Article 

Rising Market Value

Rising Market Value

Facebook goes express to mega-cap status  Full Article 

Mining Roadblock

Mining Roadblock

Coal India's plans for 20 mines hit by land, environment delays  Full Article 

Power Jolt

Power Jolt

UAE's TAQA pulls out of India power plant deal with Jaiprakash  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage