Crude gains on hopes for U.S. budget resolution, falling stockpiles

Shutterstock photo - Crude oil futures shot up on Wednesday after official data revealed U.S. stockpiles declined last week.

Hopes the White House and Congress will resolve a budgetary impasse and avoid a recession pushed up prices as well.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD90.04 a barrel on Wednesday, up 1.86%, off from a session high of USD90.27 and up from an earlier session low of USD88.25.

The U.S. Energy Information Administration reported earlier that the country's crude oil stocks dropped by 964,000 barrels to 371.7 million barrels in the week to Dec. 14., while gasoline stocks rose by 2.2 million barrels to 219.32 million barrels

The drop in inventories sent prices gaining as did ongoing tensions in the Middle East.

Meanwhile in the U.S., President Barack Obama said he hoped to strike a budgetary deal with congressional Republicans before the Christmas holidays.

Both sides of the U.S. political divide are working to avoid a fiscal cliff, a combination of tax hikes and spending cuts due to take effect at the end of this year, which could push the country into a recession if policymakers fail to address it.

Sticking points have been found in taxes, with Democrats originally calling for tax hikes on those earning at least USD250,000 a year, with Republicans originally opposed to tax hikes for anyone.

Both sides have made concessions, with Republicans warming up to tax hikes on the wealthy by offering to raise rates on those earning a minimum USD1 million a year, with Democrats reportedly countering by raising the floor to USD400,000 from USD250,000.

Elsewhere in the U.S., government data revealed that building permits increased 3.6% in November to a seasonally adjusted annual rate of 899,000 units, the highest since July 2008.

Analysts were predicting a gain of 0.8% to 0.875 million.

U.S. housing starts, however, fell by 3% in November to a seasonally adjusted annual rate of 861,000, missing expectations for a figure of 873,000 though markets still viewed the figure as evidence the sector continues to improve.

Rising German business confidence push up the price of oil, a growth-sensitive commodity.

In Europe, the Ifo economic institute's German business climate index came hit 102.4 for December, up from 101.4 in November and beating market forecasts for a 102.0 reading.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were up 1.23% at USD110.17 a barrel, up USD20.13 from its U.S. counterpart.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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