* U.S. lawmakers likely to resume budget talks later this
* Investors see last-minute deal, or at least a stop-gap
* New Japan PM to be sworn in, promises aggressive easing
By Jessica Jaganathan
SINGAPORE, Dec 26 Brent crude climbed above $109
per barrel on Wednesday in thin trade a day after Christmas,
with investors hoping for a last-minute deal to avoid a fiscal
crisis in the United States, the world's largest oil consumer.
U.S. President Barack Obama may return to Washington from
his Hawaiian holiday as early as Wednesday evening to address
the unfinished "fiscal cliff" negotiations with Congress, ahead
of a year-end deadline that would trigger harsh spending cuts
and tax hikes.
Brent crude had gained 50 cents to $109.30 a barrel
by 0249 GMT, after settling 17 cents lower on Monday before
Christmas. U.S. crude increased by 46 cents to $89.07.
"The market is very thin, with global markets trading thinly
since Christmas eve," said Ken Hasegawa, a commodity sales
manager at Newedge Japan.
"There are not that many participants and thus it's easy to
move markets up and down, so I don't think it's reflective of
the actual market and it will probably move after the Europe
market wakes up."
The next session of the U.S. Senate was set for Thursday,
but the issues presented by the "fiscal cliff" of tax hikes and
spending cuts scheduled to take effect next year were not on the
The U.S. House of Representatives has nothing on its
schedule this week, but its members have been told they could be
called back on 48 hours notice, making their Thursday return a
Some investors are now looking at a stop-gap that puts
everything off for a while as the most promising alternative.
Such a fix may help delay the spending cuts and tax hikes
further into 2013 as well as work to address in a long-term way
a budget that has generated deficits exceeding $1 trillion in
each of the last four years.
Oil had slumped on Friday after the budget talks dissolved,
but many investors doubt that lawmakers will risk the fragile
U.S. economy tipping into recession again.
Investors also took direction from the equity markets where
expectations that Japan's incoming prime minister will pursue
drastic stimulus policies to drive the world's third largest oil
consumer's economy out of deflation helped weaken the yen.
Shinzo Abe will be voted in as prime minister by
parliament's lower house on Wednesday, giving the hawkish
lawmaker a second chance at Japan's top job as the country
battles deflation and confronts a rising China.
Abe, 58, has promised aggressive monetary easing by the Bank
of Japan and big fiscal spending by the debt-laden government to
slay deflation and weaken the yen to make Japanese exports more
"There were gains in the stock markets yesterday, so that
might be a factor pushing up prices in the oil market as it
catches up," Hasegawa said.
MIDDLE EAST VIOLENCE
Oil prices also found support on tensions in the Middle
International envoy Lakhdar Brahimi pursued mediation
efforts in Damascus on Tuesday, but there was no pause in the
bloodletting as Syrian Christians marked a bleak Christmas Day
with prayers for peace.
More than 44,000 Syrians have been killed since a revolt
against President Bashar al-Assad erupted 21 months ago.
Six U.S.-allied Gulf Arab states demanded on Tuesday that
Iran end what they called interference in the region,
reiterating a long-held mistrust of their main rival.
The Islamic Republic denies trying to subvert Saudi Arabia
and its wealthy Gulf neighbours.
A communique issued at the end of a two-day summit of the
Saudi-led Gulf Cooperation Council (GCC) also urged action to
halt mass killings and violations of international law in Syria.
The oil-producing GCC states wield influence out of
proportion to their sparse populations due in part to global
energy and investment links, generous international aid and
Saudi Arabia's role as home to Islam's two holiest sites.
(Editing by Joseph Radford)