U.S. crude-oil futures rose 1.4% Wednesday after Congress passed a bill to avoid tax increases and postpone spending cuts--together known as the fiscal cliff--that threatened to possibly send the U.S. into recession.
Light, sweet crude oil for February delivery settled $1.30 higher at $93.12 a barrel on the New York Mercantile Exchange, a three-month high.
Brent crude oil on the ICE futures exchange rose $1.36 to $112.47 a barrel.
Tuesday night, the U.S. House voted on a compromise bill to increase tax rates for the richest Americans while making Bush-era tax cuts permanent for other income groups. The deal, which prevented an across-the-board tax increase, also provided Congress with more time to agree on a deficit-reduction package by delaying deep spending cuts.
Investors cheered the deal, sending the prices of stocks and commodities higher. The Dow Jones Industrial Average was recently up 246 points, or 1.9%, to 13350. Oil rose above $93 a barrel for the first time since October.
Since falling to a four-month low in November, crude-oil futures have inched steadily higher amid hopes for improvement in global economic growth.
Oil traders are betting that the compromise will help avoid a recession in the U.S., the world's largest oil-consuming country. But others are concerned that upcoming negotiations concerning Congress's need to raise the U.S. debt limit, as well as lackluster fuel demand, will keep a lid on recent gains.
"Right now, the market is relieved," said Andy Lebow, an oil trader and broker at Jefferies Bache in New York. "The question is how long these rallies can be sustained."
In addition to the fiscal cliff, price gains have also been limited by robust supplies and weak demand, particularly in the U.S. Last week, inventories at the key storage hub of Cushing, Okla., rose to a record 49.2 million barrels.
Analysts at JBC Energy noted that stockpiles in the Gulf Coast are at a six-year high, with refiners "enjoying unprecedented access" to cheap oil that is keeping a lid on further price gains.
And others say that avoiding a recession isn't going to boost fuel usage from already tepid levels.
"We are still finding it a bit difficult to connect the dots between the new budget bill and oil demand improvement," said Jim Ritterbusch, head of oil-trading advisor Ritterbusch and Associates.
Front-month February reformulated gasoline blendstock, or RBOB, settled 1.2% higher at $2.7951 a gallon. February heating oil settled 1.45 cents higher at $3.0463 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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