By Barani Krishnan
Investing.com - Oil prices were up for a third day in a row on Wednesday as promising monthly U.S. jobs data due later in the week offset unexpectedly large builds in fuel stockpiles that would have typically driven the market lower.
The U.S. Labor Department is due to report December payroll numbers for both the public and private sectors on Friday, with expectations for a growth of 424,000 jobs versus November’s gain of 210,000. Ahead of those numbers, payrolls surveyor ADP reported on Wednesday that private sector jobs itself grew almost twice as much to expectations last month, hitting 807,000.
“There is a strong correlation between monthly U.S. jobs numbers and oil consumption and I think that’s what’s keeping the oil market higher today, in spite of the huge unexpected product inventories for last week,” said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.
Crude oil stockpiles fell by 2.114 million barrels last week, the Energy Information Administration, or EIA, said on Wednesday. Analysts tracked by Investing.com had expected a draw of 3.283 million barrels instead.
Gasoline stockpiles, meanwhile, jumped by 10.128 million barrels last week, the EIA said, compared with expectations for a rise of 1.775 million. Historical EIA showed that to be the largest weekly surge in gasoline stocks since April 2020, during the height of the coronavirus crisis.
Distillates inventories also swelled more than expected, with a tally of 4.418 million barrels last week against a forecast build of 1.525 million.
Kilduff said the first week of January seasonally showed larger-than-expected drawdowns in crude stocks and higher-than-forecast builds in product inventories as those with crude barrels in their hold cleared them to avoid tax liabilities for the previous year.
“But a 10 million-barrel build in gasoline is huge, to say the least,” he added. “We’ll have to see if there’s enough consumption in the next few weeks to result in draws. Otherwise oil and gasoline prices might have to give back some, considering that OPEC+ has announced a production hike for February.”
OPEC+ — which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 other oil producers steered by Russia — greenlighted at a meeting on Tuesday a 400,000 barrel-per-day output hike for next month, similar to what it had done each month since August.
By 11:46 AM ET (16:46 GMT), West Texas Intermediate, the benchmark for U.S. crude, was up $1.26, or 1.6%, at $78.25 per barrel, after hitting an intraday high of $78.49. WT has risen 4% since the year began.
London-traded Brent, the global benchmark for oil, showed a gain of $1.18, or 1.5%, at $81.18 per barrel. Brent is up 4.4% on the year.
(Additional reporting by Sam Boughedda)