Oil Prices Rise on Supply Tightening and Positive US Job Data

Oil prices increased on Wednesday, driven by tighter supply from OPEC and Russia, along with encouraging job data from the United States. The combination of these factors indicates a potential growth in economic activity, which could boost oil demand.

At 0135 GMT, Brent crude oil was priced at $77.37 a barrel, up by 32 cents or 0.42%. Meanwhile, US West Texas Intermediate (WTI) crude climbed 42 cents or 0.57% to $74.67 a barrel.

OPEC Supply Adjustments

A Reuters survey highlighted a decline in oil production from the Organization of the Petroleum Exporting Countries (OPEC) during December, reversing an upward trend from the previous two months. Maintenance efforts in the United Arab Emirates offset the increase in output from Nigeria and other OPEC members.

Additionally, Russian oil production averaged 8.971 million barrels per day in December, falling short of the nation’s production target, as reported by Bloomberg.

US Job Market Insights

On the economic front, the United States saw a rise in job openings during November, accompanied by a low rate of layoffs. This situation reflects a labor market that is returning to pre-pandemic levels, as detailed in the Job Openings and Labor Turnover Survey (JOLTS). Increased economic growth often correlates with higher oil demand.

Capital Economics commented, "The November JOLTS data, combined with recent employment reports, presents a positive outlook for the labor market." This optimism regarding job openings is an encouraging sign for future economic activity.

Fuel Inventories and Market Trends

However, recent reports indicated a decline in US stock markets last week, with fuel inventories on the rise as noted from data provided by the American Petroleum Institute. Looking ahead, analysts predict that oil prices might average lower across the upcoming year due to anticipated production increases from non-OPEC countries.

Future Price Projections

An analysis by BMI, a division of Fitch Group, maintained a projection for Brent crude to average $76 per barrel in 2025, down from an average of $80 per barrel in 2024. The prevailing bearish outlook arises from fundamental data forecasts that suggest an oversupply in the market, where supply increases will outpace demand growth by 485,000 barrels per day.

Oil, Prices, OPEC