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

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 that 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. Many economists believe that a lack of action by the government could steer the country back into a recession, which would dampen the demand for energy.

Benchmark crude finished up 73 cents at $87.93 on the New York Mercantile Exchange.

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 4 cents to $3 a gallon.
  • Natural gas gained 6 cents to $3.42 per 1,000 cubic feet.
  • Wholesale gasoline added 4 cents to $2.69 a gallon.

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