Oil rose Tuesday as lawmakers labored to strike an agreement on the nation's debt limit and the dollar weakened on uncertainty about the economy.
While congressional leaders bickered over spending and raising the borrowing limit ahead of an Aug. 2 deadline, oil traders took their cues for buying and selling contracts from other financial markets instead of supply-and-demand basics.
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The dollar fell sharply against the euro and other currencies on Tuesday. That tends to raise the price of oil, since crude is priced in dollars and a weaker dollar makes oil more of a bargain for traders using other currencies.
Oil's gains were held in check by drooping stock markets and more evidence of sluggish economic growth. New homes sales fell 1 percent in June, according to the government. U.S. consumer confidence improved a little in July but remained weak overall, according to a monthly survey by The Conference Board. And two companies considered economic bellwethers, 3M Co. and UPS, spoke cautiously about current economic conditions when reporting quarterly earnings.
Benchmark West Texas Intermediate crude for September delivery rose 39 cents to settle at $99.59 on the New York Mercantile Exchange. It reached $100.62 earlier in the day. In London, Brent crude gained 34 cents to settle at $118.28 per barrel on the ICE Futures exchange.
The uncertainty about what will happen with the U.S. debt ceiling and a possible default is making "some of the traders seesaw back and forth," said Michael Lynch, president of Strategic Energy & Economic Research.
He thinks that oil prices could drift lower, perhaps fall $1 a day until there is a resolution about the debt limit.
When a deal is completed, traders will pay more attention to supplies, demand and expectations for the economy through the rest of the year, he said.
Energy analyst Jim Ritterbusch also speculated that oil will climb above $100 a barrel when an agreement is reached.
In other Nymex contracts for August, heating oil rose less than a cent to settle at $3.1251 a gallon, gasoline gained 1.68 cents to settle at $3.0985 a gallon and natural gas fell 2.4 cents to settle at $4.331 per 1,000 cubic feet.
The average price for a gallon of gas remains at $3.69. That's about 12 cents higher than a month ago and 95 cents higher than at this time last year.