File photo.

World oil prices advanced on Wednesday as traders welcomed the passing of a US deal to avoid a “fiscal cliff” of tax rises and huge spending cuts, analysts said.

Brent North Sea crude for February gained 91 cents to $112.02 a barrel in midday trade in London.

New York's main contract, light sweet crude for delivery in February, jumped $1.23 to $93.05 per barrel.

“Crude oil prices started the year on the positive side, posting strong gains following news that the US Congress managed to finalise a deal about the US fiscal cliff, avoiding a fiscal disaster,” said Sucden analyst Myrto Sokou.

“The US lawmakers approved a deal in order to prevent huge tax increases and spending cuts worth $600 billion that could have possibly driven the US economy into a recession. The US dollar weakened and provided strong support to most commodity prices.”

The struggling greenback makes dollar-priced crude cheaper for buyers using stronger currencies. That tends to stimulate oil demand and support higher price levels.

After bitter New Year brinksmanship, the US Congress finally backed a deal late Tuesday to avert a “fiscal cliff” of tax hikes and massive spending cuts that had threatened to unleash economic calamity.

The House of Representatives passed a deal between the White House and Republicans to raise taxes on the rich and put off automatic $109 billion budget cuts for two months, lifting the clouds of immediate crisis.

But more hard haggling is due in two months' time over further specific budget measures.

The deal's fate had hung in the balance for hours as House conservatives sought to add spending reductions to a version passed by the Senate in the early hours of 2013 that would likely have killed the compromise.

Crude futures also won support from positive data in Asian powerhouse China, which is the world's biggest energy consuming nation.

Official data showed that Chinese manufacturing activity expanded in December for a third straight month, in further evidence the world's number two economy was picking up after a slowdown.

The official purchasing managers' index (PMI) stood at 50.6 in December, unchanged from the previous month. A reading above 50

indicates expansion while anything below points to contraction.

“Strong Chinese PMI data improved market sentiment and brought further support to the oil market amid signs of improvement in the Chinese economy,” added Sokou. -Sapa-AFP