Crude oil prices advanced in Asia Wednesday as sentiment turned positive after the U.S. Congress passed a Senate-approved tax bill to avert the fiscal cliff.
Light sweet crude for February delivery surged 1.02 percent or 94 cents to $92.76 a barrel in electronic trading on the New York Mercantile Exchange during Asian trading hours. Brent crude oil futures for the February delivery rose 0.64 percent or 71 cents to $111.82 a barrel on the ICE futures exchange in London.
The Republican-dominated House late Tuesday approved the tax bill that will see a hike in income tax rates on only the wealthiest adults and stops the world’s largest oil consuming nation from falling back into a recession. A failure to arrive at a deal would have triggered $600 billion in spending cuts and tax hikes that threatened to derail the economy.
The deal will allow tax hikes for individuals earning more than $400,000 and couples making more than $450,000, which will see the tax rates rising to 39.5 percent from the current 35 percent rate. Unemployment insurance is extended for two years while sharp spending cuts amounting to about one-third of the cliff have been postponed for two months.
"It's a short-term positive. It's certainly been on investors' minds for a long time and any good news is quite a relief," Sijin Cheng, a commodities analyst at Barclays Capital, told Reuters.
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Encouraging Chinese manufacturing report also supported crude oil prices. The official data released Tuesday showed that Chinese manufacturing activity expanded for the third straight month in December. The data released by the China Federation of Logistics & Purchasing showed that the Purchasing Managers' Index remained unchanged at 50.6 in December from that in the previous month.
Meanwhile, a private sector survey Monday showed that China's manufacturing activity expanded to a nineteen-month high in December, suggesting that the world's second-largest oil consuming nation was picking up in the last three months of 2012 after slowing for seven straight quarters.
The final reading of HSBC Flash Purchasing Managers Index, a measure of the nation-wide manufacturing, climbed to 51.5 in December from its preliminary reading of 50.9 and November’s reading of 50.5.