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Crude Oil Ends Sharply Higher After Supply Data

U.S. crude oil settled sharply higher for a fourth straight day Wednesday, with investors upbeat after an Energy Information Administration report showed crude inventories to have declined, albeit less-than-expected last week. Investors were also focused on the U.S. budget talks that will avert a fiscal cliff indicated with higher taxes and severe spending cuts starting January, although some uncertainty crept in after the White House rejected House Speaker John Boehner's alternate plan to avert the fiscal cliff.

The ongoing talks over a U.S. budget deal to avoid a fiscal cliff with tax increases and spending cuts in January, hit a roadblock with White House negotiators rejecting Speaker John Boehner's Plan B to increase taxes on incomes of $1 million and above.

In the economic front, housing starts in the U.S. came in below expectations in November, although building permits - an indicator of future housing demand - showed a notable increase, the Commerce Department said Wednesday. Nevertheless, analysts believe some giveback is not a matter of concern at this point as housing starts were extremely strong in the prior 3 months.

Light Sweet Crude Oil futures for January delivery jumped $1.58 or 1.8 percent to close at $89.51 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for January scaled a high of $89.90 a barrel intraday and a low of $87.81.

Light Sweet Crude Oil futures for February delivery, he most actively traded contract, gained $1.58 or 1.8 percent to close at $89.98 a barrel on the New York Mercantile Exchange Wednesday.

The weekly oil report from the Energy Information Administration showed US crude oil inventories declined 1.00 million barrels, while gasoline stocks were up 2.20 million barrels in the week ended December 14. Analysts expected crude oil supplies to drop 2.3 million barrels, while gasoline stocks are seen adding 2 million barrels last week.

Yesterday, oil settled marginally higher tracking rising equity markets, mostly on hopes of a resolution to the U.S. budget talks that will avert the impending fiscal cliff and optimism of oil demand growth after some upbeat macroeconomic data out of the U.S.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.26 on Wednesday, down from 79.32 in North American trade late Tuesday. The dollar scaled a high of 79.38 intraday and a low of 79.01.

The euro traded higher against the dollar at $1.3249 on Wednesday, as compared to $1.3229 late Tuesday in North America. The euro scaled a high of $1.3310 intraday and a low of $1.3224.

In economic news from the U.S., a Commerce Department report revealed housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists expected housing starts to drop to 865,000 from the 894,000 originally reported for the previous month. Meanwhile, building permits rose 3.6 percent to an annual rate of 899,000 in November from the revised October rate of 868,000. Building permits, an indicator of future housing demand, had been expected to climb to 875,000 from the 866,000 originally reported for October.

From the eurozone, Germany's business confidence improved more than expected in December, survey results from the Ifo Institute revealed. The headline business climate index rose to 102.4. The reading was forecast to climb to 102 from 101.4 in November.

Eurozone's current account surplus increased in October, but was lower than what economists expected, a report from the European Central Bank showed The seasonally adjusted current account surplus rose to 3.9 billion euros in October from 2.4 billion euros in September. Economists expected the surplus to rise to 6.5 billion euros.

Meanwhile, the Bank of England policymakers voted 8-1 to leave the stimulus program unchanged at GBP 375 billion, the minutes of the December monetary policy meeting showed.

Elsewhere, Japan posted a merchandise trade deficit of 953.4 billion yen in November, the Ministry of Finance said on Wednesday. This is down 37.9 percent on year and continues to reflect slowing exports to China with no resolution to a territorial island dispute. Sinking into the red for the fifth straight month and 12th in the last 14, the headline figure beat forecasts for a shortfall of 1,035.1 billion yen following the downwardly revised deficit of 551.1 billion in October (originally 549.0 billion yen).

by RTT Staff Writer

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