Thursday’s Asian session, as a larger-than-expected inventory drawdown in the US lifted near-term sentiment in the oil complex. The move comes amid continued caution ahead of key macroeconomic data, including Friday’s US labor market report, which could influence US Dollar dynamics and, in turn, commodity prices.
Inventory draw tightens crude market
According to the latest US Energy Information Administration (EIA) weekly petroleum status report, US crude stockpiles for the week ended January 2 declined by 3.831 million barrels, following a smaller draw of 1.934 million barrels the week before. Analysts had anticipated a build of approximately 1.1 million barrels, making the actual draw a surprise to the upside. The more pronounced inventory decline signals stronger demand or reduced supply availability in the near term, underpinning the recent rebound in WTI prices.
Geopolitical developments temper upside
Despite the supportive inventory data, broader upside in WTI may remain capped amid evolving geopolitical developments. Recent announcements that Venezuela has agreed to export between 30 million and 50 million barrels of crude to the United States have injected complexity into the supply outlook. Such a reallocation of Venezuelan oil flows could ease supply constraints but also weigh on prices by increasing availability, especially if redirected from traditional buyers like China.
Tensions surrounding Venezuela’s leadership and associated geopolitical risks continue to influence market sentiment, providing intermittent price support even as longer-term supply additions are debated.
US jobs data in focus
Market participants are also monitoring the US economic calendar closely. Friday’s US Nonfarm Payrolls report is expected to show continued but modest job gains in December, with forecasts near 60,000 positions and a slight decline in the unemployment rate. Any indication of labor market softness could weaken the Greenback and lend additional support to oil prices, given their denomination in USD.
Overall, while WTI’s recovery above $56 reflects tightening crude supplies and risk-sensitive trading, persistent global oversupply concerns and shifting geopolitical narratives suggest a cautious outlook with limited conviction for a sustained breakout above key resistance levels in the absence of stronger fundamental catalysts.
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