US Benchmark Rises with Developments on Washington Negotiations
The current crude price of West Texas Intermediate, the U.S. benchmark, posted a slight rise after news of developments in Washington negotiations to solve the problem of the looming “fiscal cliff.”
On the NYMEX, crude futures prices for delivery in January were 83 cents, or 1 percent, higher to $87.56 per barrel. The rise happened after reports that House Speaker John Boehner gave President Barack Obama ground in the long delayed negotiations on the fiscal cliff by agreeing to permit higher taxes on incomes over $1 million in return for spending reductions. Several insiders in Washington described the change as a new development, even if both sides remain far apart on plenty of other important details.
The deal happened as the crude price per barrel floats in a limited range of around $84 to $90. According to analysts, that news may still not significantly push oil away from these levels.
Andy Lebow of Jefferies Bache thinks that the market will most likely stay within its current range unless there is substantial progress, or if the talks completely fall apart.
He added that $84 to $90 is a balanced range for current crude prices.
Analyst Dominick Chirichella of the Energy Management Institute expects the volume of trading to fall during the peak-holiday period. Moreover, the analyst predicted crude prices to stay within the same range, saying that he does not see any factor that will push prices out of their present range.
Chirichella expects the policy makers of Washington to reach an agreement to stop the fiscal cliff before the year ends. He added that a deal could provide short term support for the price of oil.
Meanwhile, the crude futures price of Brent was slightly lower by 0.2 percent, or 18 cents, to $108 per barrel. According to Lebow, U.S. crude may have benefited from reports confirming that the new pipeline capacity is ready to be added in quarter one of next year to allow additional crude flow from Cushing, Oklahoma to the Gulf Coast. A surplus of oil at the Cushing hub has led to lower prices for the U.S. crude relative to international blends.
The gap between the crude prices per barrel of WTI and Brent was possibly caused by traders getting profits through WTI purchasing and Brent selling after betting throughout the past week that the difference between both benchmarks would broaden.