Current Oil Price Rises after Fiscal Cliff Deal

The current oil price gained more than a penny to move higher than $93 per barrel after lawmakers of the United States submitted legislation to avert the fiscal cliff that may have led to another recession for the biggest economy of the world.

The U.S. Congress voted close to midnight to forward legislation to the President following a hysterical day of political bickering in Washington.

By early afternoon European time on the NYMEX, the U.S. benchmark for delivery in February was $1.49 higher at a crude price per barrel of $93.31. The contract gained $1.02 to settle at $91.82 during the most recent trading day.

Economists had cautioned that if no action is taken by the Congress, a series of automatic tax rises and budget cuts would have taken effect at the start of this year that could have led to another recession. They were concerned that unemployment would surge, which would result to a weaker energy demand.

Some Republican Congressmen were initially against legislation which neutralizes the tax increases of the middle class and reduces spending by $24 billion that are set to begin in the next couple of months while sharply raising taxes on the rich. The Republicans wanted additional spending reductions, but eventually consented to a simple vote of yes or no to the legislation which had already went through the Senate.

Due to the wide rise in market sentiment, the U.S. currency weakened with investors’ confidence to invest in oil and other assets that are relatively riskier. A weaker greenback results in cheaper crude, a more appealing investment for traders holding other currencies. The euro increased from $1.3213 during the last trading session to its current rate of $1.3280.

On London’s ICE Futures Exchange, each barrel of Brent gained $1.12 to $112.23.

Elsewhere in the commodities markets, wholesale gasoline gained 3.88 cents to a price of $2.8005 per gallon. The cost of heating oil rose 2.62 cents to $3.085 per gallon. And natural gas shed 4.1 cents to $3.31 per thousand cubic feet.