NEW YORK: Oil prices were mixed in choppy trading yesterday, with Wall Street equities and US crude futures receiving support from optimism that a budget deal might be reached in time to avert looming mandated US spending cuts and tax hikes.
Brent crude futures seesawed near unchanged, with the February contract in front-month position after the January contract expiration on Friday.
The front-month US January crude rose, though the rally ran into resistance ahead of the 50-day moving average at $87.67 a barrel.
Republican House Speaker John Boehner edged slightly closer to US President Barack Obama’s key demands on Sunday and the sign of movement in the talks on avoiding the tax increases and spending cuts, the so called “fiscal cliff,” sparked optimism on Wall Street, lifting equities and supporting oil. “Hopes for a budget deal have the equities market putting in a good day and US crude has followed along, while the switch to the February contract and outlook for pretty weak economies in Europe have helped limit Brent,” said Addison Armstrong at Tradition Energy in Stamford Connecticut.
Investors have worried that allowing the mandated tax increases and slashed spending to go forward starting in January could send the US economy back into recession, curbing already tepid demand for oil.
Brent February crude fell two cents to $108.16 a barrel at 12.12pm EST (1712 GMT), having swung from $107.72 to $108.50.
“Brent has been having some short-term support at $108. Today it’s broken below $108, but it certainly hasn’t collapsed as a result,” said Christopher Bellew, a senior oil broker at Jefferies Bache in London.
Brent hit a 2012 high of $128 in March and is on course to end the year little changed in percentage terms as economic worries have countered price-supporting supply disruptions in the Middle East and other regions such as the North Sea.
US January crude was up 73 cents at $87.46 a barrel, having reached $87.62. US crude was on pace to end the year with an 11 percent loss from where it ended 2011.
Crude prices rose on Friday after surveys showed China’s manufacturing sector expanded in early December and that US factories were having their best month since April.
Tempering enthusiasm about the US economy, the New York Federal Reserve said in a report released yesterday that manufacturing in New York State declined for a fifth straight month in December and the labour market remained weak. Motiva Enterprises suspended the restart of its 325,000 barrel-per-day crude unit at the Port Arthur, Texas, refinery after a small fire yesterday, sources familiar with refinery operations said.
The sources said the unit was not being shut down, as it was after a small fire last week, but that the process of gradually increasing production rates had been paused.
US RBOB gasoline futures moved higher yesterday, helped by the struggles of the Motiva refinery and a shut down petrol pipeline in New Jersey.
Buckeye Partners said on Sunday the “620 pipeline system will remain out of service until it is repaired and deemed safe to return to operations.” The line runs from Linden, New Jersey, to Macungie, Pennsylvania.
Reuters
