Crude Oil Gains in Asian Trading

WTI Crude oil prices rose as news of a key U.S. pipeline expansion will be completed next month and optimism about a deal to avoid the “fiscal cliff” prompted spread trading between the two contracts. Brent crude prices declined while US oil futures rose. Crude futures closed higher, buoyed by ongoing tensions in the Middle East as well as on optimism about talks to avoid US tax hikes and spending cuts that threaten to send the nation’s economy into recession. Reports showed that neither side in Syria has an upper hand and that the civil conflict could continue for a long time.

Oil rose for a third day in New York on speculation that an agreement will be reached to avert automatic spending cuts and tax increases known as the fiscal cliff in the U.S., the world’s biggest crude consumer. News hitting the wires last evening showed the President Obama and the Republican House Speaker were making headway and that negotiations were moving forward in a positive manner. Commodities and equities traded on the positive side the catalyst seems to be enthusiasm about the ongoing U.S. fiscal policy negotiations after Republican House Speaker Boehner announced a willingness to consider income tax hikes for those earning more than USD 1 million per year and an increase in the budget ceiling in exchange for Democrats agreeing to cuts to both discretionary spending and entitlement spending.

Last week oil closed at 86.88, range bound between 85.35 to 87.68 oil was trading at 88.12 this morning. OPEC ministers met last week and decided to hold quotas, which is still at the higher end but they agreed to review if production exceeds demand. Chinese data and its expansion plan also helped crude to move higher but EIA inventories were higher than expected. Global growth outlooks remained negative. With a weaker US dollar, oil should have seen more upward action as it was also supported with tensions growing in Egypt and Syria as the US and NATO agreed to send troops and missiles to defend Turkey’s borders.

The only concern is a downward growth forecast ranging from the US to Germany including the UK and the entire euro zone for 2013 continues to be the leading factor which is affecting the crude prices. Beside that the US fiscal cliff and possible recession also hold down the oil prices.

Traders will closely watch negotiations in the US along with the EIA inventory later this week. This should be the last solid week of trading ahead of holiday schedules. Oil is expected to hold below the 90.00 price.

Natural gas closed higher on NYMEX, for the first time in 8-sessions, as revised forecasts showed below-normal temperatures that would spur heating demand. Also traders took advantage of the weak US dollar and the low price of the commodity to pick up a good buy. Natural gas is trading at 3.361 adding 11pts in early morning trading today.