Budget talks, home prices lift oil prices

16:00, Dec 27 2012

Crude oil prices have risen sharply on higher US home prices and hopes of a budget deal in Washington.

Yesterday, US benchmark crude jumped US$2.37, or 2.7 per cent, to finish at $90.98 per barrel in thin post-Christmas trading in New York.

US home prices rose in most big cities in October, compared with a year ago, a key report showed. The improvement is adding to economic growth, which generally boosts energy consumption and lifts prices.

President Barack Obama will return to Washington today, after a brief holiday, to resume budget talks with Congress, which are aimed at avoiding the "fiscal cliff", the deep budget cuts and tax increases that could slow US growth.

While traders and investors kept an eye on the economy and the fiscal cliff, analysts noted that light trading during the holidays could cause broad swings in oil prices.

"We've got a very, very thin trade," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

"It doesn't really take much buying to spike it."

Meanwhile, petrol prices at the pump held at an average of US$3.25 a gallon (3.78 litres). Petrol was at its lowest for the year last Friday, at an average of $3.22 a gallon.

In London, Brent crude, used to price various kinds of foreign oil, rose $2.27 to $111.07. AP

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