Congress’ approval of legislation to avert the so-called fiscal cliff was seen as good news to oil traders. Brent crude oil reached an 11-week high, trading at nearly $113 per barrel yesterday in London. Analysts say the U.S. averted economic calamity by approving spending cuts and preventing huge tax hikes that could have driven the world’s largest economy into recession.
The fiscal cliff agreement boosted investors’ appetite for riskier assets and depressed the dollar against major currencies. Economists warned that if Congress did not prevent the series of tax increases and spending cuts due to automatically start this year a recession was likely. A spike in unemployment and less consumer spending would likely depress energy demand.
Brent crude rose $1.79 per barrel on Wednesday to $112.90, before easing back to $112.70. U.S. crude rose $2.05 to a high of $93.87 per barrel, its highest price since Sept. 21, before easing back $93.12 per barrel. In afternoon trading the Dow Jones industrial average was up about 2 percent.
Analysts also noted oil markets were boosted by Chinese data pointing to a recovery in the world’s second-largest economy.
National average gasoline prices are higher this week while diesel prices are near steady. The Energy Information Administration reported national average gasoline prices at $3.30 per gallon, 4 cents higher than the previous week. Average diesel prices were reported at $3.92 per gallon, down one-half of one cent per gallon from the previous week.