HG MARKETS:

Oil prices increased on Wednesday, driven by tightening supplies from Russia and OPEC members, alongside data revealing an unexpected rise in U.S. job openings, signaling robust economic activity and potential growth in oil demand. Brent crude futures rose by 37 cents, or 0.5%, to $77.42 per barrel, while U.S. West Texas Intermediate (WTI) crude advanced 44 cents, or 0.6%, to $74.69 per barrel.

Production levels within the Organization of the Petroleum Exporting Countries (OPEC) declined in December following two consecutive months of growth. This drop was primarily attributed to field maintenance in the United Arab Emirates, which offset production gains in Nigeria and other member states. Concurrently, Russian oil output averaged 8.971 million barrels per day in December, falling short of the country’s production target.

U.S. crude inventories experienced a significant decline last week, lending additional support to WTI prices. The American Petroleum Institute (API) reported a drawdown of 4.022 million barrels in U.S. crude stockpiles for the week ending January 3, a notable decrease compared to the previous week’s decline of 1.442 million barrels. Market consensus had projected a more modest reduction of 250,000 barrels.

Geopolitical developments also contributed to the bullish sentiment in the oil market. Escalating tensions in the Middle East, coupled with the ongoing conflict between Russia and Ukraine, have the potential to further bolster WTI prices in the near term.

In China, the National Development and Reform Commission (NDRC), the country’s top economic planning body, released new guidelines on Tuesday aimed at building a unified national market. These measures are designed to dismantle market barriers, stimulate domestic demand, and enhance economic openness. This positive policy development, viewed as a stimulus measure, could support oil prices given China’s status as the world’s second-largest economy.

Looking ahead, market participants are closely monitoring the release of the Federal Open Market Committee (FOMC) meeting minutes later on Wednesday, which may provide insights into U.S. monetary policy. Additionally, the U.S. employment report for December, scheduled for release on Friday, is expected to show the addition of 154,000 new jobs, with the unemployment rate projected to remain steady at 4.2%. A stronger-than-anticipated labor market report could strengthen the U.S. dollar, potentially applying downward pressure on dollar-denominated commodities such as oil.