US oil futures rose to the highest in more than nine weeks on Wednesday on hopes that renewed talks will prevent a US fiscal crisis, and as cold weather and technical buying added to the upward momentum.
US crude for February delivery rose by 2.7 per cent to settle at $90.98 per barrel, and reached its highest intraday level since October 19. Brent rose 2.1 per cent to settle at $111.07. Volumes were thin with some traders absent during the US holiday season. UK markets were shut on Wednesday for
President Barack Obama 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 US 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 a$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.
Traders have also been placing a premium on oil for months due to geopolitical tensions in the Middle East.
Oil markets had been mostly flat on Monday, the last trading day before Christmas. Prices had dropped by more than one per cent on Friday after US fiscal talks last broke down.
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.