White House

Oil prices soared today as a deal to avert the US fiscal crisis received approval from Congress, with prices also aided by a positive demand outlook from China.

Brent crude increased $1 to $112.11 a barrel, while US crude rose 90 cents to $92.72 a barrel, after rising to $92.85 earlier, the highest since October, reported Reuters.

On Tuesday, US lawmakers came to terms on a deal to prevent the ‘fiscal cliff’ of significant tax hikes and spending cuts that had the potential to push the country into another recession.

Oil prices also gained support from China, indicating a revival of the world’s second largest economy and second biggest oil consumer after the US.

The economy of China gained momentum in the last three months of 2012, as reflected in the country’s official manufacturing purchasing managers’ index, which was steady at 50.6 in December 2012.

Analysts expressed confidence in the potential of Brent, suggesting that it could gain further to $112.41 a barrel after breaking through a resistance at $111.31.

Oil prices are expected to remain high in 2013 due to continuing tensions in the Middle East region.

Iran is currently conducting naval exercises to display its military power in the Strait of Hormuz, a shipping route through which 40% of the world’s sea-borne oil exports pass.

The country said it will block the strait if other super powers carry out military attacks on it over its disputed nuclear programme.

Leaders of Sudan and South Sudan will meet on Friday to discuss the plans to increase border security and to reinstate vital oil flows.

During most of 2012, South Sudan halted its entire oil production of 350,000 barrels per day as a consequence of a disagreement with Khartoum on oil transit fees.

Image: Oil prices gained as US lawmakers agreed on a deal to prevent the ‘fiscal cliff’. Photo: courtesy of Edbrown05.