Oil advanced from a two-week low in New York after US President Barack Obama said congressional leaders approved a deal to raise America's debt ceiling, stoking speculation the world's biggest crude user will avoid a default.
Futures surged as much as 1.9 per cent after Obama spoke from the White House and Senate Majority Leader Harry Reid endorsed the emerging accord between Republican leaders and the administration. The US won't default on its obligations, Senate Minority Leader Mitch McConnell said.
A US Labour Department report on Friday may show July payrolls rose by 90,000 workers.
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"It's a kind of relief for the market," Thina Saltvedt, an analyst at Nordea Bank, said in a phone interview from Oslo. "Risk appetite is again increasing and investors are moving into more risky assets such as oil and commodities."
Crude for September delivery rose as much as $1.85 to $97.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.91 at 11.35am London time. The contract dropped $1.74 to $95.70 on Friday, the lowest settlement since July 14. Prices gained 0.3 per cent last month and are 19 per cent higher the past year.
Brent for September settlement climbed $2.06, or 1.8 per cent, to $118.80 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $21.82 to New York futures, compared with a record close of $22.63 on July 14.
"Brent is reacting to the tension in the Middle East escalating once again," Ole Hansen, senior manager of trading advisory team at Saxo Bank, said from Copenhagen.
Congressional leaders are sifting through the details of the tentative bipartisan agreement to raise the debt ceiling, preparing to sell the deal to sceptical Republicans and Democrats ahead of possible votes yesterday.
The deal would raise the $14.3 trillion (Dh52.5 trillion) debt ceiling through 2012, cut spending by about $1 trillion and call for enactment of a law shaving another $1.5 trillion from long-term debt by 2021 — or institute punishing reductions across all government areas, including Medicare and defence programmes, according to congressional officials.