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Oil prices rise to near $89 per barrel as optimism over US budget negotiations grows

The price of oil rose Wednesday as worries receded over whether U.S. political leaders would reach a budget deal before a year-end deadline.

Benchmark crude for January delivery was up 35 cents to $88.85 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract finished down 59 cents at $88.50 a barrel in New York on Tuesday.

U.S. lawmakers have less than a month to reach a compromise to avoid a series of sharp tax increases and spending cuts that take effect in January. Economists believe those measures could send the U.S. back into a recession.

Negotiations have been slow-paced and contentious. Still, many analysts say President Barack Obama and Republicans in the U.S. Congress will eventually reach a compromise to avert the so-called fiscal cliff.

Analysts at DBS Bank Ltd. in Singapore said that some lawmakers and business leaders "have painted a positive outlook for US economy if the cliff is averted in a timely fashion."

Such upbeat views help lift oil prices on the assumption that energy consumption will increase if the economy improves.

Brent crude, which is used to price international varieties of oil, rose 25 cents to $110.09 on the ICE Futures exchange in London.

Other futures on the New York Mercantile Exchange:

— Heating oil rose 1 cent to $3.01 a gallon.

— Natural gas fell 0.8 cent to $3.531 per 1,000 cubic feet.

— Wholesale gasoline fell 0.1 cent to $2.688 a gallon.