By Geoffrey Smith
Investing.com -- Crude oil prices pushed higher on Thursday, with the fundamental support from Saudi Arabia's production cut bolstered by the wholesale enthusiasm for risk assets in the wake of the runoff elections that will put the U.S. Senate under the effective control of the Democratic Party.
By 11:25 AM ET (1625 GMT), U.S. crude futures were up 0.7% at $50.98, while Brent crude futures, the global benchmark, were up 0.4% at $54.65, closing in on an 11-month high.
U.S. Gasoline RBOB Futures also rose 0.4% to their highest since last February, at $1.4815 a gallon.
Consensus wisdom has it that President-elect Joe Biden will have an easier job of pushing through his cabinet picks and his budget policy with a unified Democratic Congress. Chuck Schumer, who is set to take over as Senate Leader from Mitch McConnell, noted on Wednesday that one of the party's first priorities will be to raise the direct stimulus payments to households foreseen in the latest stimulus package, from $600 to $2,000.
The hope is that those funds will underpin economic activity and, as far as the oil market is concerned, U.S. demand. That has held up better than expected in recent weeks, with industrial activity consistently running ahead of expectations even as services activity has slowed due to the surge in Covid-19 cases. Data from the U.S. government on Wednesday showed that U.S. crude inventories fell by over 8 million barrels last week, an impressive number, even after accounting for the traditional volatility in stockpiles around the new year. The figures were notable for the complete lack of U.S. imports from Saudi Arabia, something that has happened in over 35 years.
After announcing a surprise cut of 1 million barrels a day for its output for February and March, Saudi Arabia sent another strong signal to the market on Wednesday by sharply raising its official selling prices for those months.
Analysts at Rystad Energy noted that the step would be enough to put the physical market back into deficit in the first quarter of this year, when many had started to expect surpluses due to a fresh shortfall in demand arising from Covid-19-stricken economies in Europe and elsewhere.