United States oil futures rose to the highest in more than nine weeks on Wednesday on hopes that renewed talks would prevent a US fiscal crisis, and as cold weather and technical buying added to the upward momentum.
US crude for February delivery rose by 2.7 per cent to settle at $90.98 per barrel, and reached its highest intraday level since October 19, Reuters reported.
Brent rose by 2.1 per cent to settle at $111.07. Volumes were thin with some traders absent during the United Statesâ€™ holiday season. United Kingdom markets were shut on Wednesday for Boxing Day.
President Barack Obama cut short a vacation to return to Washington on Thursday and is to hold budget talks aimed at averting the so-called fiscal cliff, a series of automatic tax increases and government spending cuts.
The measures will take effect next week if the administration and lawmakers are unable to reach a deal.
Forecasts for temperatures at below seasonal norms also helped boost oil prices, since a cold snap can raise demand for products like heating oil. Commodity Weather Group expects a cold pattern to continue for most of the United States for the next 10 days.
Technical buying also helped boost US oil futures, which extended gains on Wednesday after breaking through a 100-day moving average for the first time since October.
That move could set up a test of the 200-day mark at $92.20 a barrel, traders said.
â€œThe market is taking advantage of thin holiday trading, boosting out of its trading range. Its thin volumes and technical trading,â€ Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, told the news wire.
Some traders attributed gains in part to news that OPEC member country, the United Arab Emirates, said on Wednesday it had arrested a â€œcellâ€ of UAE and Saudi Arabian nationals who were allegedly planning to carry out attacks in both countries, which hold some of the worldâ€™s largest oil fields.
Traders have been placing a premium on oil for months due to geopolitical tensions in the Middle East.
Crude also rose due to buying at a key technical support level above $90 a barrel, and possible algorithmic short-covering, traders said.
Oil prices rose in spite of a modest drop for US equities prices, as the S&P 500 index fell by 0.3 per cent.
Oil was also supported by expectations Japanâ€™s new prime minister would pursue drastic stimulus policies to drive the economy of the worldâ€™s third-largest oil consumer out of deflation.
Shinzo Abe was voted in as prime minister by parliamentâ€™s lower house on Wednesday, giving the hawkish lawmaker a second chance at Japanâ€™s top job.