WASHINGTON - Oil rose for a second day in New York on speculation that Republicans and Democrats are getting closer to a budget agreement.
Prices gained as much as 1.1 percent as House Speaker John Boehner proposed to raise tax rates on household income above $1 million a year in exchange for containing entitlement program costs. Boehner previously opposed higher rates for any income level. President Barack Obama, who wants them to start at $250,000, rejected the offer.
“There is some progress with Boehner indicating a tax increase,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We are moving closer to a resolution here and that’s helping to stabilize things.”
West Texas Intermediate crude for January delivery advanced 71 cents, or 0.8 percent, to $87.44 a barrel at 12:48 a.m. on the New York Mercantile Exchange. The increase is the fourth in five days.
Brent for February settlement fell 20 cents to $107.98 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium to WTI based on the February contracts narrowed to $20.16 a barrel from $20.93 on Dec. 14.
The Brent-WTI spread declined as Enterprise Products Partners LP expects to begin operating the expanded Seaway oil pipeline in early January. Seaway reversed its flow in May to carry crude to Houston from Cushing, Oklahoma, the delivery point for New York oil futures.
WTI has declined 12 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, America’s biggest storage hub. That has left it at an average $17.35 below Brent this year, compared with a premium of about 95 cents in the 10 years through 2010. Brent, the benchmark grade for more than half the world’s crude, has risen 0.5 percent this year.
In his latest offer, Boehner also said he would accept $1 trillion in new revenue, up from $800 billion, according to a person familiar with the talks who requested anonymity when discussing the negotiations. That person said Boehner’s offer would pair the revenue increase with equal cuts to entitlement programs.
“You are getting some optimism that there will be a fiscal deal,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The overall sentiment is getting better and more hopeful.”