Oil headed for a ninth weekly gain in 10 as Saudi Arabia’s unilateral output cut eased over-supply fears and a Democratic sweep in the U.S. paved the way for more stimulus spending.
Futures in New York traded near $51 a barrel on Friday and are up around 5% for the week. Democrat wins in elections in Georgia mean the party is poised to take control of the Senate, House and presidency, spurring a broad move higher in financial markets. That came after Saudi Arabia pledged earlier in the week to cut production by 1 million barrels a day in February and March.
The spreading coronavirus remains a near-term cap to further gains, however. Accelerating cases across Europe prompted a call from the World Health Organization for stricter measures across the continent, while the U.K.’s latest lockdowns are already compounding a plunge in fuel sales. The new Covid-19 variant first discovered in England is also appearing in more U.S. states.
Crude has surged more than 40% since the end of October thanks to a series of vaccine breakthroughs even as the virus led to more lockdowns. There are some signs the rally may have gone too far, with Goldman Sachs Group Inc (NYSE:GS). cautioning the Saudi output cuts probably reflect the kingdom’s expectations that demand will weaken further as more travel restrictions are imposed.
The recent surge in prices has also pushed Brent’s 14-day relative strength index above 70 — a sign the benchmark may be due for a pullback. WTI’s 14-day RSI is also just in overbought territory.