Oil rises on continued U.S. budget deal optimism

NEW YORK The price of oil rose Tuesday on a growing belief that political leaders in Washington may reach a compromise to head off the dreaded "fiscal cliff."

Benchmark crude is up 82 cents to $88.02 in midday trading in New York.

Concessions on both sides of the aisle have spurred optimism that a deal will be reached to avert the series of spending cuts and tax increases that take effect on Jan. 1.

But despite recent progress, President Barack Obama and House Speaker John Boehner are both still playing political hardball. On Tuesday morning, Boehner said he is readying a backup bill aimed at averting the "fiscal cliff" because the president has yet to offer a balanced package of revenues and spending cuts that would reduce burgeoning federal deficits.

The move is an attempt to give Republicans political cover if Washington fails to reach a deal.

Brent crude, which is used to price international varieties of oil, rose $1.14 to $108.78 on the ICE Futures Exchange in London.

Prices at the pump hit a new low for the year just under $3.24 a gallon.

Other futures on the New York Mercantile Exchange:

-- Heating oil rose 5 cents to $3 a gallon.

-- Natural gas gained 4 cents to $3.40 per 1,000 cubic feet.

-- Wholesale gasoline added 4 cents to $2.70 a gallon.