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Oil price jumps as U.S. averts "fiscal cliff"

An oil drill in Taft, Calif.
David McNew/Getty Images

NEW YORK The price of oil rose Wednesday by almost 2 percent before pulling back, as traders cheered a deal in Washington to avert the dreaded "fiscal cliff."

The House voted near midnight to send the bill to President Barack Obama after a tense day of political brinksmanship on Capitol Hill.

In afternoon trading U.S. benchmark crude for February delivery rose $1.03 to $92.85 a barrel on the New York Mercantile Exchange. It was as high as $93.87 a barrel at one point.

More hurdles are ahead for the U.S. economy, including a new deadline for more spending cuts in two months. Oil analyst Phil Flynn says in the meantime, "ignorance is bliss and this deal should propel oil...near $96 a barrel."

Brent crude, used to price various kinds of international oil, was up $1.07 to $112.18 a barrel on the ICE Futures exchange in London.

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 pushed the U.S. into recession. A spike in unemployment and less consumer spending would likely depress energy demand.

Some House Republicans opposed the bill, which drops middle-class tax increases and $24 billion in spending cuts set to take effect, while raising taxes on the wealthy. A majority in the House eventually agreed to a simple yes-or-no vote on the bill, which had already passed the Senate by a wide margin.

In other energy futures trading on the New York Mercantile Exchange:

- Wholesale gasoline rose 4 cents to $2.80 a gallon.

- Heating oil added a penny at $3.05 a gallon.

- Natural gas fell 14 cents to $3.22 per 1,000 cubic feet.