Oil prices rise on OPEC cuts and strong U.S. economic data
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Crude oil prices climbed on Wednesday, buoyed by declining OPEC and Russian production in December and robust economic data from the United States. Brent crude was trading at $77.34 per barrel, while West Texas Intermediate (WTI) reached $74.65 per barrel, both rising from earlier levels.
Key drivers behind the rally
Declining OPEC and Russian production A survey revealed that OPEC’s production fell by 50,000 barrels per day (bpd) in December.
The UAE experienced the largest drop, with a decline of 90,000 bpd due to field maintenance.
Iran’s production also dropped by 70,000 bpd, adding to the overall reduction.
Russia’s December output slipped below the agreed OPEC+ quota, averaging 8.971 million bpd, further tightening global supply.
Strong U.S. economic data
The latest U.S. employment survey showed low layoffs and growing job openings, signaling economic resilience.
This strength supports higher oil demand, further boosting crude prices.
The larger-than-expected drawdown in U.S. crude inventories added additional bullish sentiment to the market.
Analyst insights
IG analyst Yeap Jun Rong noted that robust U.S. data and the drawdown in inventories have likely exhausted recent selling pressures, paving the way for a potential recovery.
Vandana Hari of Vanda Insights highlighted that cold fronts in the U.S. and Europe, combined with concerns over tighter Iranian sanctions under the Trump administration, are providing additional support. However, she cautioned that crude prices may face profit-taking due to overbought conditions and lingering global economic challenges.
OPEC and market dynamics
The OPEC-wide production cut comes after months of tight trading ranges for crude, with December’s declines driven by maintenance-related disruptions.
Russia’s reduced output further underscores the global supply tightness, even as some OPEC+ members increased their production.
Outlook
While the current rally is supported by strong fundamentals, its sustainability remains uncertain. Factors such as colder weather, potential U.S. sanctions on Iranian oil, and profit-taking by traders could influence near-term price movements. Analysts are also watching for signs of global economic headwinds, which may weigh on demand in the medium term.
Conclusion
Oil markets are riding a wave of optimism fueled by declining OPEC production and robust U.S. economic indicators. However, with potential overbought conditions and geopolitical uncertainties, traders should brace for possible volatility in the weeks ahead.
Key drivers behind the rally
Declining OPEC and Russian production A survey revealed that OPEC’s production fell by 50,000 barrels per day (bpd) in December.
The UAE experienced the largest drop, with a decline of 90,000 bpd due to field maintenance.
Iran’s production also dropped by 70,000 bpd, adding to the overall reduction.
Russia’s December output slipped below the agreed OPEC+ quota, averaging 8.971 million bpd, further tightening global supply.
Strong U.S. economic data
The latest U.S. employment survey showed low layoffs and growing job openings, signaling economic resilience.
This strength supports higher oil demand, further boosting crude prices.
The larger-than-expected drawdown in U.S. crude inventories added additional bullish sentiment to the market.
Analyst insights
IG analyst Yeap Jun Rong noted that robust U.S. data and the drawdown in inventories have likely exhausted recent selling pressures, paving the way for a potential recovery.
Vandana Hari of Vanda Insights highlighted that cold fronts in the U.S. and Europe, combined with concerns over tighter Iranian sanctions under the Trump administration, are providing additional support. However, she cautioned that crude prices may face profit-taking due to overbought conditions and lingering global economic challenges.
OPEC and market dynamics
The OPEC-wide production cut comes after months of tight trading ranges for crude, with December’s declines driven by maintenance-related disruptions.
Russia’s reduced output further underscores the global supply tightness, even as some OPEC+ members increased their production.
Outlook
While the current rally is supported by strong fundamentals, its sustainability remains uncertain. Factors such as colder weather, potential U.S. sanctions on Iranian oil, and profit-taking by traders could influence near-term price movements. Analysts are also watching for signs of global economic headwinds, which may weigh on demand in the medium term.
Conclusion
Oil markets are riding a wave of optimism fueled by declining OPEC production and robust U.S. economic indicators. However, with potential overbought conditions and geopolitical uncertainties, traders should brace for possible volatility in the weeks ahead.