Brent Slowly Climbs Toward $110 as US Fiscal Cliff Outlook Improves
Brent crude oil inched toward $110 on Thursday morning, trading at $109.71 at 7:48 GMT. The commodity responded to worsening tension in the Middle East and improved sentiment about the U.S. fiscal cliff, but oil demand outlook in 2013 remained a ceiling over prices.
U.S. President Barack Obama made statements suggesting that he believed that the fiscal cliff discussions would conclude before Christmas. This gave investors a bit of confidence that the number one oil consumer would be able to address its deficit and avoid a series of tax increases and spending cuts totaling nearly 600 billion dollars.
If the US does reach a deal before January 1st, many believe it will be well on its way to sustained economic recovery.
Although the U.S. and China both seem to be making slow progress toward recovery, trouble in Europe weighs on the sentiment that global economies will improve in 2013. Many analysts still predict that there will be a crude supply surplus in 2013, and as a result prices will be under pressure.
Geo-political factors have balanced concerns about future demand, as fighting in the Middle East has threatened supply interruption. Violent protests in Egypt over President Mohamed Mursi's decree that his decisions could not legally be challenged have created instability in the region. His decision to grant himself such sweeping powers has enraged his opponents and many Egyptians.
Reutersreported that Iranian officials commented that they would continue to move forward with their uranium enrichment program, a decision that likely angered leaders in Israel and much of the West as they have slapped heavy sanctions on the country to try to prevent the program's advancement. Though Iranian officials insist the program is being developed in order to create an alternative source of energy, many believe it is being used to create a nuclear bomb.
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