Crude prices rallied on Wednesday, the first trading day of 2013, after U.S. lawmakers reached a deal to avert the "fiscal cliff".

Market sentiment was lifted as the U.S. Congress finally muddled through the recession-inducing "fiscal cliff" with a stopgap bill.

By a vote of 257 to 167, the U.S. House approved a Senate bill late on Tuesday night, agreeing to raise taxes for the rich and managing to avoid the automatic tax hikes and broad spending cuts that are due to take effect on Tuesday.

Although this deal was regarded as a temporary resolution as the important issue of military and domestic spending cuts were put off and remain unresolved, concerns among investors over U.S. fiscal uncertainties that had been pressuring on the crude markets were greatly eased. Appetite for riskier assets increased, pushing up the prices of equities and oil.

Besides, oil prices got support from Chinese positive data released on Wednesday. China's official manufacturing purchasing managers' index remained unchanged at 50.6 in December, showing the steady expansion of the manufacturing industry of the world's second largest oil consumer, which added to evidence that its economy picked up in the fourth quarter of 2012.

Tension in the Middle East also offered support. Iran is carrying out naval drills in the Strait of Hormuz, the important transportation path out of the oil-rich Middle East. Iran also threatened to block Hormuz if the country came under military attack over its disputed nuclear program, while the U.S. said it would not tolerate any obstruction of commercial traffic through the strait.

Continuing unrest in Syria as well as in Iraq added to tension in the region.

Light, sweet crude for February delivery gained 1.30 dollars, or 1.42 percent to settle at 93.12 dollars a barrel on the New York Mercantile Exchange. Brent crude for February delivery rose 1. 36 dollars, or 1.22 percent to close at 112.47 dollars a barrel.