Singapore: Brent crude climbed above $111 per barrel on Friday as US lawmakers launch a last-chance round of budget talks to prevent the world’s largest oil consumer from slipping back into recession.
Signs of a recovering US economy also supported US crude prices, which are on track for their biggest weekly gain since mid-August.
Brent crude had inched up 20 cents to $111 per barrel by 08:15 am, on course to post a weekly climb of nearly 1.9% and a full-year increase of about 3.4%, which would be its smallest gain in four years.
US crude rose 41 cents to $91.28, set for its first yearly loss in four years, although it was on track to end the week about 3% higher.
“The US fiscal cliff will continue to direct crude prices until they’re resolved,” said Natalie Rampono, a commodities analyst at ANZ in Melbourne.
US President Barack Obama will meet congressional leaders from both parties at the White House later on Friday to try to revive negotiations to avoid going over the “fiscal cliff” - tax hikes and spending cuts slated to take effect on 1 January.
Members were divided on the odds of success, with a few expressing hope, some talking as if they had abandoned it and a small but growing number suggesting Congress might try to stretch the deadline into the first two days of January.
In order to be ready to legislate if an agreement takes shape, the Republican-dominated House of Representatives convened a session for Sunday.
Positive data out of the US on Thursday highlighting the momentum building in the economy also supported oil prices.
The number of Americans filing new claims for jobless benefits fell to a nearly 4-1/2 year low and new home sales hit their highest level since April 2010.
But capping gains in prices, US consumer confidence fell more than expected in December, dropping to a four-month low, as the fiscal uncertainty pushed back against recent optimism about the economy.
US oil inventories
The American Petroleum Institute said in a report released late on Thursday that US crude inventories fell 1.2 million barrels in the week to 21 December, less than the expected drop.
The US Energy Information Administration’s oil inventory report is due on Friday at 06:30 pm. The inventory reports were delayed because of Tuesday’s Christmas holiday.
Oil also rose as Japan, the world’s third largest consumer of the commodity, sped up efforts to turn around its economy.
New Prime Minister Shinzo Abe’s repeated calls for “unlimited” monetary easing and policies aimed at reducing the yen’s strength have bolstered expectations of a sustained period of yen weakness.
Concerns about potential supply disruptions in the Middle East continued to support oil prices and were reinforced after United Arab Emirates security forces arrested a cell of UAE and Saudi Arabian citizens that the UAE said was planning attacks in both countries and other states.
The international envoy seeking a negotiated solution to Syria’s 21-month-old conflict said on Thursday political change was needed to end the violence which has killed 44,000 people.