NEW YORK (TheStreet) -- Oil prices were rebounding Monday morning as anxiety over a potential U.S. debt default subsided with President Obama's announcement that the White House and Republican congressional leaders had reached an agreement on raising the government's debt ceiling and cutting spending.

The deal would cut government spending by more than

$2 trillion

over a decade.

Brent crude futures for September delivery were popping $1.76 to $118.50 a barrel, earlier hitting a one-month high of $120.40, while light sweet crude oil for September delivery was rising $1 to $96.70.

The U.S. dollar, which initially jumped after the announcement, was trading sideways against a basket of key currencies. The U.S. dollar index falling 0.07% to $73.69, lending support to oil prices.

"The agreement appears to have lifted sentiment all over the globe," JBC Energy Research Center analysts agreed.

Voting on the package wasn't expected until Monday,

so that congressional members would have time to review it.

"The geopolitical risk premium, meanwhile, may also help drive prices upwards given growing unrest in Syria," the JBC analysts added. Early Friday, saboteurs blew up part of a crude oil pipeline connecting the Homs refinery in Syria with the Mediterranean export terminal of Tartous. More violence erupted over the weekend amid ongoing internal conflicts and uprisings in the country.

The impact of the sabotage on oil infrastructure and the country's growing instability on scheduled exports of 135,000 barrels a day of August-loading Syrian Heavy is unclear at the moment, according to JBC Energy.

The gains in oil prices were "tempered by the release of China's June manufacturing

Purchasing Managers Index data," which slid to 50.7 from 50.9 in May, now at its lowest point since March 2009, Tradition Energy senior market research director Addison Armstrong said.

The Institute for Supply Management releases its U.S. manufacturing index at 10:00 am ET.

The September natural gas contract was rising 1% to $4.185 a million British thermal units as it brought in bargain hunters following a sell-off on weak fundamentals.

"It is hard not to be bearish when a sizzling heat wave across almost all of the country still adds 43 bcf

billion cubic feet to storage and a storm that makes landfall near Corpus Christi only sidelines 0.5% of production," said Cameron Hanover analysts. "Still, this market is oversold and is approaching $4.00. If it holds, we have to expect a technical rally."

"Fundamentals are poor."

Natural gas prices plummeted to a five-day low of $4.129 earlier Monday.

Oil and gas stocks were advancing, with

Exxon

(XOM) - Get Exxon Mobil Corporation Report

was rising 1.5% to $80.95 in premarket trading Monday.

Total S.A.

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(TOT) - Get Total SA Sponsored ADR Class B Report

was ahead by 0.5% to $54.35,

Royal Dutch Shell

(RDS.A)

was increasing 0.9% to $74.21,

Suncor Energy

(SU) - Get Suncor Energy Inc. Report

was adding 2.1% to $39.03,

Kinder Morgan Energy Partners LP

(KMP)

was gaining 1.4% to $71.47,

Energy Transfer Partners

(ETP)

was advancing 1.3% to $47.53 and

El Paso Pipeline Partners, L.P.

(EPB)

was popping by 4.3% to $36.69.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here:

Andrea Tse

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