* U.S. crude leads oil complex higher
* Gasoline posts biggest 2-day gain since early November
* Germany's Ifo data better than expected, supportive to oil
(Updates throughout)
NEW YORK, Dec 19 (Reuters) - Oil prices rose on Wednesday as
expectations a battle over the U.S. budget will be resolved
spurred optimism about crude demand in the world's top consumer.
Concerns about the risk of a U.S. recession if no deal is
reached to avoid the "fiscal cliff" in January, as well worry
about the euro zone crisis, have weighed on the outlook for
demand for much of the fourth quarter, countering bullish
concerns that Middle East unrest could reduce oil supplies.
Even as President Barack Obama threatened to veto a
Republican tax plan as talks to avert a budget crisis by the end
of the year turned sour despite recent progress, both sides
appeared confident a deal remained within reach.
"There was a risk-on tone when we started the day globally.
All markets were looking to go higher, and I think crude has fed
off that," said Addison Armstrong, director of market research,
Tradition Energy in Stamford, Connecticut.
"You have a lot of good upside momentum going."
World shares rose to a 17-month high, with U.S. crude
finding additional momentum after the release of data from the
U.S. Energy Information Administration showing fuel demand hit
the second highest level for the year last week, while crude and
heating oil inventories fell.
Brent February crude rose $1.52 to settle at $110.36
a barrel in the biggest one-day gain since Nov. 19. The
front-month contract pushed above the 50-day moving average Of
$109.79 and briefly topped the 200-day moving average of
$110.39, technical levels closely watched by traders.
U.S. crude led the gains in the oil complex, however, with
the U.S. January crude contract trading up $1.58, or 1.8
percent, to settle at $89.51 a barrel, marking the biggest gain
in the front-month contract since Nov. 29.
With the January contract set to expire at the end of the
session, the more actively traded February crude also
gained $1.58, settling at $89.98 a barrel, after trading as high
as $90.33.
U.S. RBOB gasoline rose nearly 2 percent, taking
gains for the front-month contract over the past two sessions to
over 3 percent and marking the biggest two-day gain since Nov.
9. Gasoline traders have been closely watching for the restart
of the 325,000 barrel per day (bpd) crude unit at Motiva
Enterprises' Port Arthur, Texas refinery.
Repairs at the unit, which was shuttered shortly after it
was launched earlier this year due to pipe problems, were
expected to be completed on Sunday after a leak triggered a fire
on Monday, according to sources familiar with operations.
Oil found further support from the improving outlook for the
euro zone economy after Germany's Ifo economic research
institute said its business climate index rose to 102.4, higher
than the forecast of 102.0.
"Germany didn't disappoint - the Ifo business sentiment
reading sent a strong signal highlighting again the dynamism of
the German economy and the potential to support the euro zone
recovery next year," said Gekko Markets trader Anita Paluch.
Adding to positive sentiment was data showing U.S.
homebuilding permits touched their highest level in nearly 4-1/2
years in November.
Simmering tension in the Middle East, which has underpinned
prices during the year, also helped push oil higher.
Iran has said it will not stop its higher-grade uranium
enrichment in response to external demands, signalling a tough
bargaining stance ahead of planned new talks with world powers.
Israel has threatened air strikes on Iran if its nuclear
work is not curbed through diplomacy or sanctions, keeping
concerns about potential oil supply disruption in focus and the
threat of a Middle East war damaging to the global economy.
(Reporting by Robert Gibbons and Matthew Robinson in New York,
Manash Goswami and Florence Tan in Singapore and Sudip
Kar-Gupta, Shadia Nasralla, David Sheppard and Simon Falush in
London; editing by Andrew Hay and Alden Bentley)