Oil Up on Middle East Fears, Fiscal Cliff Hope

NEW YORK (AP) -- The price of oil gained nearly 3 percent Monday on rising concern about the Middle East and less worry about the U.S. "fiscal cliff."

President Barack Obama and leaders of the House and Senate appeared to have constructive discussions Friday to avoid a series of automatic tax increases and spending cuts scheduled to kick in on Jan. 1 in the absence of government action. Economists have been warning of dire consequences if no action is taken, including the possibility of another recession.

Overseas, the escalating conflict between Israel and Hamas raised concerns about Middle East crude supplies. Analysts say supplies could be disrupted if the conflict engulfs countries elsewhere in the Middle East, a region that produces more than one-third of the world's oil.

Benchmark crude rose $2.54, or 2.9 percent, to $89.46 around midday in New York. Oil is now priced higher than it was on Election Day.

Brent crude, which is used to price international varieties of oil, rose $2.65, or 2.4 percent, to $111.60.

U.S. stocks were rising as well. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was on track for its biggest one-day increase since Sept. 13.

Meanwhile, drivers are seeing favorable movement in pump prices ahead of the Thanksgiving holiday. Gasoline fell by more than a penny over the weekend to an average of about $3.42 a gallon nationwide. A month ago, the average was $3.69.

Other futures on the New York Mercantile Exchange:

• Wholesale gasoline rose 5 cents, or 2 percent, to $2.76 a gallon.
• Heating oil gained 9 cents, or 3.2 percent, to $3.07 a gallon.
• Natural gas fell 4 cents to $3.75 per 1,000 cubic feet.