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Crude rebounds amid bottom fishing, looks past U.S. fiscal fears

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Investing.com - Crude oil futures rose on Friday amid demand from bottom fishers, wiping out earlier losses sustained on fears a U.S. budgetary impasse may cool growth next year and crimp demand for energy and fuels in the process.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD90.32 a barrel on Thursday, up 0.38%, off from a session high of USD90.53 and up from an earlier session low of USD89.27.

Failure to strike a budgetary agreement in the U.S. will allow sweeping tax cuts to expire at the same time deep cuts to government spending are scheduled to kick in, a combination known as a fiscal cliff that could contract the economy by 0.5% next year if Congress fails to avoid it, according to Congressional Budget Office estimates.

Both sides of the U.S. political aisle recently came close to agreeing on the role income tax hikes should play when narrowing deficits and paying down debts.

Democrats, who originally called for tax hikes on incomes of over USD250,000 a year, hiked that threshold to USD400,000.

Republicans, who originally opposed any and all income tax hikes, later said they would accept raising rates on those earning a minimum USD1 million.

House Speaker John Boehner earlier said Republicans in the U.S. House of Representatives will push through their proposal despite President Obama's calls to veto it, which sent oil dropping on fears political differences could contract or even cool growth rates next year.

Solid data pushed up crude prices by enticing bottom fishers.

Official data released earlier showed that manufacturing activity in the Philadelphia-region expanded at the fastest pace in eight months this month.

The Philly Fed manufacturing index rose to 8.1 in December from -10.7 in November, compared to expectations for a reading of -3.0.

Elsewhere, the National Association of Realtors reported earlier that existing home sales rose by 5.9% to a seasonally adjusted 5.04 million units in November, beating market calls for U.S. existing home sales to rise 2.3% to 4.87 million units.

Revised government data showed that the U.S. economy grew by an annualized 3.1% in the third quarter of this year, up from a preliminary estimates of 2.7% and also above market calls for 2.8% growth.

On the labor front, the U.S. Department of Labor reported that weekly initial jobless claims last week rose by 17,000 to 361,000, compared to expectations for an increase of 13,000 to 357,000.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were up 0.05% at USD110.42 a barrel, up USD20.10 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.

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