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U.S. fiscal deadlock, Mideast supply concerns hold oil market back

Publish Date27/12/2012 07:52:16 AM

Last Update27/12/2012 09:26:41 AM

U.S. fiscal deadlock, Mideast supply concerns hold oil market back

Oil stood roughly above $90 a barrel on Thursday after jumping to the highest level in two months, backed by hopes of a near deal to avert the so-called fiscal cliff amid renewed concerns of supply disruption in the Middle East.

WTI Crude for February delivery was up 0.27 percent at $91.10 a barrel as of 06:59 GMT, a level slightly below the two-month high hit yesterday in New York, when prices jumped 2.7 percent from the prior close, but now are little changed.

Oil markets is trading quietly after Wednesday`s sharp gain as President Barack Obama and lawmakers turned their focus to a possibly inching economic hazard by the end of the year unless they prevent the country from falling off the cliff.

Fears about the Middle Eastern stability took center stage pushing prices after security forces in the United Arab Emirates arrested UAE and Saudi Arabian citizens who were allergy planning to launch terrorist attacks in the region.

Geopolitical tensions in the Middle East continue to pressure prices amid growing speculation of possible supply disruption. Meanwhile, Iran resumes naval exercise near the Straits of Hormuz, through which a massive portion of the world`s oil supply is transported.

Moving West to Iraq, the central government in Baghdad said earlier this week it was suspending some $296.6 million in payments to Kurdistan after accusing the latter of failing to honor its export commitments.

Tension between the two sides had ground to a halt now, at a cost of $20 million a day. Iraq and Kurdistan are already swaying near a full-scale civil war, with ownership of the oil fields on their mutual frontier at the center of the fight.

Oil markets are still driven by the fiscal deadlock in the U.S. with less than five days for the President and Congress to bridge differences to avoid roughly $500 billion in sharp tax hikes and spending cuts set to take effect in the New Year.

So far, the White House and Republicans in Congress have been unable to strike a deal.  The USDIX, which tracks the performance of the greenback against a six-currency basket, fell for the second day to 79.51.


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