Energy Speculators Waiting on Washington

Crude oil futures jumped above $91 a barrel in Asia today supported by fall in the US crude oil supplies and rally in the Asia markets after US lawmaker seem to make headway on the Fiscal Cliff.

Crude-oil supplies fell by 1.2 million barrels for the week ended Dec. 21, according to a report from the American Petroleum Institute late Thursday. Gasoline inventories rose by 2.4 million barrels and distillate stocks rose by 2.9 million barrels, the report from the trade group said. The API data arrived ahead of the more closely watched U.S. Energy Information Administration report delayed due to the holiday until later today.. Analysts polled by Platts expect a 2 million-barrel decline in crude stockpiles. They forecast a rise of 250,000 barrels in gasoline inventories and a decline of 350,000 barrels in distillate supplies.

Yesterday, U.S. crude was down 11 cents, or 0.12 percent, to settle at $90.87 a barrel. Crude oil prices were down as there was no outcome for the US budget talks which increased the fears of recession in US. Late in the day on Thursday, progress seemed to move forward as congressional leaders informed their members they would need to be available for a vote on Sunday and President Obama scheduled a meeting later today with political leaders. Markets now expect a deal and a vote before year end.

However the downside in crude was limited as we saw positive data for US unemployment claims coupled with a new home sales data showing sales climbing to the highest level in two years. Traders expect oil prices to move in a range as can expect some positive news on Sunday over the fiscal crisis and also lower crude inventories expected today can support the prices.

Oil speculators remain focused on Washington budget discussions, where earlier in the day talks to stave off the automatic package of spending cuts and tax increases at the end of this year appear to have stalled. The Treasury Department also warned that the government would hit its legal borrowing limit by Monday without further Congressional approval. Oil traders–along with participants in most markets–have been following negotiations in recent weeks, amid concern that failure to reach a deal could have adverse effects on the economic recovery and ultimately dent oil demand.

On Wednesday, however, prices rallied largely on geopolitical concerns. Futures shot 2.7% higher after reports of arrests in the United Arab Emirates over alleged terrorist plots. Meanwhile, Iran resumed naval exercises near the Strait of Hormuz, a major thoroughfare for the world’s seaborne oil but this time there seems to be very little rhetoric.

 U.S. natural gas ended down slightly on Thursday, with the milder turn in the extended weather forecast. Traders can now expect Natural Gas prices to go up as heating demand is likely to push natural gas prices up as the US is covered with snow. Natural gas futures on the New York Mercantile Exchange expired down 3.8 cents at $3.354 after trading between $3.317 and $3.38