Oil rises on optimism for last-minute U.S. debt accord, no Iran deal

West Texas Intermediate erased its weekly losses in early American trading on Wednesday as Senate leaders resumed talks on ending the fiscal impasse. Meanwhile, no deal was struck at a two-day meeting between Iran and six major world powers in Geneva, although arrangements for another round of negotiations later this month indicated that compromises being offered by the Islamic Republic were taken seriously.

On the New York Mercantile Exchange, WTI crude for delivery in November rose by 0.59% to $101.81 per barrel at 14:48 GMT. Prices held in range between days high and low of $102.05 and $100.78 per barrel respectively near yesterday’s three-and-a-half-month low. The contract fell by 1% on Tuesday and erased its weekly decline, leaving it flat.

Meanwhile on the ICE, Brent futures for settlement in November rose by 0.60% to $110.08 per barrel at 14:49 GMT. Prices shifted in a day’s range between $110.30 and $109.01 a barrel. The European benchmark fell by 0.9% on Tuesday and cut its weekly retreat to less than 0.7% on Wednesday.

Oil prices edged higher on optimism that U.S. lawmakers will reach a bipartisan last-minute agreement on extending the nations borrowing authority and will avoid breaching the October 17 deadline. This happens after Fitch Ratings warned it could trim the AAA sovereign credit rating of the U.S.

Senate majority Leader Harry Reid, a Democrat, and Minority Leader Mitch McConnell, a Republican, who began face-to-face talks on Saturday for the first time since July after negotiations between House Republicans and the White House failed, suspended talks on Tuesday while the Republican-controlled House of Representatives was discussing its own bill. Senate leaders however rushed to lock up an accord after the House scrapped its vote.

The framework being negotiated by Senators Reid and McConnell would extend the nations borrowing authority through February 7 and provide government funding up to January 15, 2014.

Adam Jentleson, Reid’s spokesman, said in a statement yesterday: “Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach.” Don Stewart, McConnell’s spokesman, said today the leaders were still working on a deal.

No deal with Iran yet

Meanwhile in Geneva, Iran signaled its ready to scale back its nuclear activity, indicating will for a thaw in relations with the Western nations. However, no deal was struck yet between the two sides as the Islamic Republic did not intend to renounce all enrichment itself “under any circumstances”, an unnamed Iranian delegation source told the the Russian state news agency RIA.

Israel, Irans biggest enemy, asked the six world powers, the U.S., U.K., France, China, Russia and Germany, to demand a full shutdown of the countrys uranium enrichment program and rule out any early sanctions removal, something which Iran said was out of question and offered to reduce uranium enrichment by 20%.

The unnamed delegate said for RIA: “Apart from suspending 20 percent enrichment, it is possible to consider a scenario involving reducing the number of centrifuges. However, for this, concrete steps from our opponents are required, which we do not see yet.”

Despite the expected lack of deal, a second round of negotiations between the Persian Gulf country and the six major powers was expected to be scheduled in the coming weeks to try end a decade-long deadlock in relations. Catherine Ashton, EU foreign policy chief, and Iranian Foreign Minister Mohammad Javad Zarif are expected to issue a joint statement after the conclusion of todays round of talks.

Market players will also be keeping a close watch on key economic data from China due on Friday. China’s National Bureau of Statistics will likely report that the country’s economy grew by 1.9% in the third quarter, up from 1.7% in the previous three months. The median forecast of 21 analysts surveyed by Reuters showed that year-on-year China’s economy has expanded by 7.8% in the third quarter, up from 7.5% in the previous period.

The national agency is also due to release the country’s retail sales which likely inched up to 13.5% in September from 13.4% in the preceding month. Industrial production is projected to have expanded by 10.1%, slightly below August’s 10.4% advance. The Asian nation accounted for 11% of global consumption in 2012, ranking second after the U.S. with 21%.