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Oil prices hit two-and-a-half-year high on Wednesday as extreme cold, crude oil draws, Iran tensions supported prices.

According to the American Petroleum Institute (API), the weekly U.S. crude oil stocks fell by 5 mio. barrels last week to 427.8 mio. barrels. Both distillates and gasoline stocks increased by 4.3 and 1.9 mio. barrels respectively. Now this afternoon's oil inventory report from the Energy Information Administration (EIA) will be followed closely for confirmation/deviation from the trend. Consensus is a 5 million-barrel draw in crude oil, small build in distillates and around 2 million-barrel build in gasoline inventories. Extreme cold in the U.S. could trigger increased demand for heating oil and hence affect the inventories.

In Iran, tensions continue, but have not yet affected oil supply in the country which was a major concern to the oil market. Iran is OPEC's third-largest oil producer with a current production of around 1.8 mio. barrels per day.

OPEC produced around 32.47 mio. barrels per day in December - thus is in full compliance with the current oil price cut agreement between the group and a number of non-OPEC oil producers. Declines in production were seen in Libya, Venezuela and Saudi Arabia while Nigeria, Iraq and Angola increased production.

In the U.S. central bank's meeting minutes released yesterday it was stated that "Most participants reiterated their support for continuing a gradual approach to raising the target range, noting that this approach helped to balance risks to the outlook for economic activity and inflation..." The participants noted that the economic activity in the country has increased at a "solid rate". The ISM Manufacturing PMI for December came out improved (59.7 vs. 58.2 previous). Tomorrow sees U.S. jobs data. Overnight, Chinese Caixin Services PMI for December also improved (53.9 versus 51.9 previous). Later today, UK Services PMI for December is published. .