NEW YORK: Oil prices rallied yesterday on expectations a battle over the US budget will be resolved and reduce the threat of recession in the world’s top oil consumer. Prices were also supported by a drop in US crude oil and heating oil inventories last week reported by the US Energy Information Administration.
World shares rose to 17-month highs and the euro hit an 8-1/2-month peak against the dollar as optimism that a budget pact will prevent currently mandated spending cuts and tax hikes from sending the US over the so called “fiscal cliff” that investors fear might push the economy into recession.
Also lending support to oil was an improving outlook for the euro zone economy after Germany’s Ifo economic research institute said its business climate index rose to 102.4, higher than the forecast of 102.0.
Front-month Brent February crude rose $1.40 to $110.24 a barrel by 12:48pm EST (1748 GMT), moving above the 50-day moving average Of $109.79, a technical indicator closely watched by chart-watching traders.
The US January crude contract, set to expire at the close of Wednesday’s session, gained $1.77, or two percent, to $89.70 a barrel, having hit $89.85 in the session.
Reuters
