By Gurdeep Singh Crude oil prices rose along with regional equities in Asia Thursday on optimism that U.S. lawmakers will reach a budget agreement in time to avoid massive spending cuts and tax hikes that could derail an economic recovery in the world's largest oil consumer. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $86.77 a barrel at 0641 GMT, up $0.28 in the Globex electronic session. January Brent crude on London's ICE Futures exchange rose $0.34 to $109.85 a barrel. The optimism over U.S. budget talks was fuelled by comments from President Barack Obama that he was hopeful the White House and Congress could reach a deal before Christmas. Earlier Wednesday, House of Representatives speaker John Boehner said he was optimistic a deal over the fiscal cliff could be reached. "Following the agreement to provide further financial assistance to Greece, market players are clearly turning their attention to the next pressing problem, namely the budget dispute in the U.S," analysts at Commerzbank said in a note to clients. Crude oil prices have declined for three straight days after posting strong gains last week on concerns over a U.S. budget deal as well as weak oil demand and high supplies in the global market. On Thursday oil prices also found some support from a surprise decline in U.S. crude oil inventories, although analysts say the Department of Energy data reported overnight offered mixed cues on the fundamental outlook of the market. U.S. refiners lifted crude runs by 1.9% last week to a three-month high of 15.174 million barrels a day, up more than 600,000 barrels a day from a year earlier, but crude stocks were still sufficient to cover 24.7 days of current demand, ahead of the five-year average of 23.5 days. "Although crude stocks failed to increase, the 707,000-barrel build at Cushing looked bearish since it will keep the WTI spreads wide," said Jim Ritterbusch at Ritterbusch and Associates in a research note. Further, the higher Cushing stocks also deepened WTI's discount to Brent to over $23 a barrel, although weak differentials in the North Sea market because of low demand will likely cap further gains in the spread, keeping it rangebound around $22-$24 a barrel, Mr. Ritterbusch said. Nymex reformulated gasoline blendstock for December--the benchmark gasoline contract--rose 70 points to $2.7409 a gallon, while December heating oil traded at $3.0130, 50 points higher. ICE gasoil for December changed hands at $939.00 a metric ton, up $7.00 from Wednesday's settlement. Write to Gurdeep Singh at gurdeep.singh@dowjones.com

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