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Crude Near Highest In More Than Two Months As U.S. Averts Fiscal Cliff

By CommoditiesJan 02, 2013 09:23AM GMT Add a Comment
 
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After the U.S. lawmakers managed to avert the fiscal cliff by approving a deal preventing huge tax hikes and spending cuts that would have pushed the world's largest energy consumer into recession, the outlook for demand on oil improved. The deal fulfills President Barack Obama's re-election promise to raise taxes on the nation's wealthiest households, and brings relief to markets since this issue has been on investors' minds for a long time triggering worries of a possible recession.

Crude is trading as of this writing around the $92.80 per barrel compared with the opening at $91.68, while the highest is seen at $92.83 and the lowest at $91.55. Brent is trading as of this writing around the $112.05 after rising 0.85%. Natural gas is trading around $3.326 per 1,000 cubic feet after falling 0.75%, while heating oil is trading around $3.053 after rising 0.70% and gasoline is trading around $2.795 a barrel after rising 1.23%.

Crude oil also rose after China’s manufacturing sector showed expansion for the third month in December, which proves that recovery in the world’s second-biggest oil consumer, might extend to this year, brightening the outlook for demand on oil. Adding to the downside pressures on oil prices was the dollar’s sharp fall on Wednesday that improved the appeal of the dollar dominated oil, as demand for safe haven diminished following the US budget deal.

Meanwhile, tensions in the Middle East also kept oil prices rising, as fighting in Syria continues, with the government’s troops bombing opposition-held areas on New Year's Day, while Iran is carrying out naval drills in the Strait of Hormuz to display its military capability. Markets will follow today EU’s and UK’s PMI manufacturing as well as Germany’s consumer prices, while later in the day a report may show that U.S. factories produced more in December as the ISM manufacturing may rise to 50.3.
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