nvesting.com-- Oil prices rose in Asian trade on Wednesday, extending a bounce from the prior session as U.S. industry data pointed to a drop in oil inventories, while production by OPEC countries was seen falling.

Prices gained some ground this week amid persistent signs of strength in the U.S. economy, while traders bet that cold weather in the U.S. and Europe will buoy demand. 

Brent oil futures expiring in March rose 0.5% to $77.41 a barrel, while West Texas Intermediate crude futures rose 0.5% to $73.97 a barrel by 20:37 ET (01:37 GMT). Both contracts were close to their highest levels since mid-October. 

US inventories shrink sharply- API 

Data from the American Petroleum Institute showed on Tuesday that U.S. oil inventories shrank by more than 4 million barrels in the week to January 3, substantially more than expectations for a draw of 250,000 barrels. 

The reading marked a second straight week of draws for inventories, as the world’s biggest fuel consumer saw increased travel during the year-end holiday season. Cold weather in the country, stemming from a polar vortex, is also expected to spur demand for distillates, especially heating oil.

The API data usually heralds a similar reading from government inventory data, which is due later on Wednesday. 

Shrinking inventories herald tighter oil supplies in the U.S., and also signal healthy demand in the country. 

OPEC output seen dropping December

Data from Reuters showed oil production by countries in the Organization of Petroleum Exporting Countries fell in December, with maintenance activity in the United Arab Emirates offsetting a production hike in Nigeria.

Bloomberg data showed Russia’s oil production fell below its 8.978 million barrels per day target in December.

The OPEC and its allies had pushed forward plans to begin increasing production until at least the second quarter of 2025, amid persistent weakness in oil prices.

Concerns over slowing demand in China and strong production outside the OPEC had weighed on oil prices, as had recent strength in the dollar. 

Oil prices lost about 3% in 2024.