Oil prices rebound in anticipation that USA will reach a deal to avoid tax hikes and spending cuts

30-Nov-12

Oil prices rebounded in Asian trade Thursday on hopes the United States will reach a deal to avoid the fiscal cliff of tax hikes and spending cuts that would likely tip the country back into recession. A strong upward revision of Q3 US economic growth, to 2.7% from 2% also helped sentiment though the details of the data hid some worrisome data on consumer spending. As per AFP, New York's main contract, West Texas Intermediate (WTI) for delivery in January climbed US$1.58 to $88 a barrel, while Brent North Sea crude for January rose by over a dollar to US$110.7 a barrel in London trade. Better than expected US economic data helped send prices back towards their recent highs. However, prices continue to skim on the low side of its three-month range, weighed down by slower global growth. Concerns abound regarding the pace of talks to ward off the fiscal cliff and set a long-term budget-deficit reduction plan, with the Democrats and Republicans at odds over raising taxes or cutting spending. Financial markets would remain volatile until the Republicans and Democrats came up with a deal before the January 1 cut-off date, when the US$600 bln worth of measures come into effect.