The price of oil jumped by more than dollar to above US$93 a barrel Wednesday after U.S. lawmakers passed legislation to avoid a "fiscal cliff" that could have pushed the world's biggest economy into recession.
The U.S. House of Representatives voted near midnight Tuesday night to approve a tax and spending bill and send it to President Barack Obama after a frantic day of political brinkmanship in Washington.
By early afternoon in Europe, benchmark West Texas Intermediate crude for February delivery was up $1.49 to US$93.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract had risen $1.02 to finish at US$91.82 per barrel in New York on Monday.
Brent crude, used to price various kinds of international oil, was up $1.12 to US$112.23 a barrel on the ICE Futures exchange.
Economists had warned that if Congress did not take action a series of tax increases and spending cuts due to automatically start this year could have helped push the U.S. into recession.
Some House Republicans at first opposed the bill, which neutralizes middle class tax increases and $24 billion in spending cuts set to take effect over the next two months while raising taxes on the wealthy. They wanted more spending cuts but hours later agreed to a simple yes-or-no vote on the bill, which had already passed the Senate.
As a result of a broad increase in market sentiment, the dollar weakened as investors felt confident to invest in relatively riskier assets.
A weaker dollar makes crude cheaper and a more attractive investment for traders using other currencies. On Wednesday, the euro rose to $1.3280 from $1.3213 on Monday, the previous trading session.
In other energy futures trading on the Nymex, wholesale gasoline rose 3.88 cents to US$2.8005 a U.S. gallon (3.79 litres), heating oil added 2.62 cents to US$3.058 a gallon and natural gas fell 4.1 cents to $3.31 per 1,000 cubic feet.