ECONOMIC INDICATORS

Oil trades near 4-month high before vote on U.S. debt ceiling

BLOOMBERG FILE PHOTO/PHIL WEYMOUTH
OIL PRICES ROSE to a four-month high this morning ahead of the debt ceiling vote in the U.S. House of Representatives.
Posted 1/23/13

NEW YORK - Oil traded near a four-month high as the U.S. House of Representatives neared a vote to temporarily suspend the country’s borrowing limit.

Prices were little changed as the Republican-led House is expected to pass legislation today to suspend the $16.4 trillion debt ceiling until May 19. U.S. oil inventories probably increased 2 million barrels last week after production reached a 20-year high, a Bloomberg survey showed.

“The debt-ceiling vote does keep investors on their toes,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “A suspension of the limit would temporarily put the debt problem on the back burner and could help the market. We do expect a big build in oil inventories and oil is kind of overbought.”

West Texas Intermediate crude for March delivery was unchanged at $96.68 a barrel at 10:19 a.m. on the New York Mercantile Exchange. The February contract expired yesterday at $96.24, the highest close for a front-month contract since Sept. 17. The average volume of all futures traded was 0.4 percent below 100-day average.

Brent for March settlement gained 17 cents to $112.59 a barrel on the London-based ICE Futures Europe exchange. The volume of futures exchanged was 31 percent more than the 100-day average. The European benchmark contract traded at a premium of $15.91 to WTI. The gap was $15.16 on Jan. 17, the narrowest in almost six months.

Republican maneuver

A temporary suspension of the borrowing limit would remove for now the debt ceiling as a tool for seeking spending cuts. Republicans plan to use two other approaching deadlines -- the March 1 start of automatic spending cuts and the need to pass a bill to fund the government by the end of March -- to extract spending reductions from President Barack Obama and congressional Democrats.

Global investors say the state of U.S. finances is the greatest risk to the world economy and almost half are curbing their investments in response to budget battles, a Bloomberg poll showed. Thirty-six percent of respondents cited the nation’s fiscal woes as the biggest threat, according to the Jan. 17 survey of Bloomberg subscribers.

U.S. crude stockpiles probably rose to 362.3 million in the seven days ended Jan. 18, according to the median of nine analyst estimates before a report from the Energy Department.

“The market is waiting for tomorrow’s inventories data,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Oil’s rally to a four-month high is a little overextended and you may see some profit-taking.”

Gasoline stockpiles

Gasoline stockpiles probably climbed 1 million barrels, or 0.4 percent, to 236 million, according to the survey. An advance of that size would leave supplies at the highest level since February 2011. Inventories of distillate fuel, a category that includes heating oil and diesel, probably rose 500,000 barrels, or 0.4 percent, to 132.9 million.

The government data is being released a day later than usual because of the Martin Luther King Jr. Day holiday on Jan. 21 in the U.S. The industry-funded American Petroleum Institute is scheduled to release separate inventory figures today.

U.S. home prices climbed 5.6 percent in the 12 months through November as buyers competed for a dwindling inventory of properties, according to the Federal Housing Finance Agency.

Prices rose 0.6 percent from October on a seasonally adjusted basis, the FHFA said today in a report. The average estimate of 15 economists in a Bloomberg survey was for a 0.7 percent advance.

“The market is still focused on economic factors and there are some expectations that things are improving,” said McGillian. “Some of the economic data in the U.S. are fairly supportive.”

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