Oil prices get a boost from upbeat China data and talk of deeper OPEC output cuts

0
5

Oil futures settled higher on Monday, buoyed after signs of a rebound in manufacturing activity in China as well as the potential for OPEC and its allies to agree on deeper production cuts when they meet later this week.

“Trade war headlines have been the main driver of the markets, but since late last week, OPEC+ policy expectations, economic data, and inventory/production releases have all reemerged as market moving influences,” said Tyler Richey, co-editor at Sevens Report Research.

West Texas Intermediate crude for January delivery












CLF20, +0.32%










 rose 79 cents, or 1.4%, to settle at $55.96 a barrel on the New York Mercantile Exchange, while February Brent crude












BRNG20, +0.26%,










the global benchmark, advanced 43 cents, or 0.7%, to $60.92 a barrel on Futures Europe.

Oil rose alongside equity markets in Asia after data showed a pickup in manufacturing activity in China.

Article continues below Advertisement...

The Caixin manufacturing rose to 51.8 in November from 51.7 in October, Caixin Media Co. and research firm Markit said Monday — with the reading remained above the 50 level that separates expansion from contraction. Earlier, China’s official manufacturing PMI reading moved back into expansion activity, rising to 50.2 in November from 49.3, according to the country’s National Bureau of Statistics, marking the first reading above 50 for the index since April.

In the U.S. however, the Institute for said its manufacturing index sank to 48.1% in November from 48.3% in October. That downbeat data dulled some of the earlier enthusiasm for energy fed by the Chinese economic data, while also pulling the Dow Jones Industrial Average












DJIA, -0.96%










 lower by more than 200 points.

Meanwhile, developments around meetings of members of the Organization of the Exporting Countries, or OPEC, and its allies on Thursday and Friday was expected to set the tone for markets this week. Crude was finding support after remarks by Iraq’s over the weekend signaled that OPEC and its allies, known as OPEC+, would consider deepening cuts by 400,000 barrels a day to 1.6 million barrels.

Read: Expectations grow for deeper cuts by OPEC and its allies

“This differs from expectations last week, where there was a growing consensus that we would only see an extension to the deal, rather than deeper cuts as well,” said Warren Patterson, head of commodities strategy at ING, in a note. “Cuts of this magnitude, along with full compliance, would do a good job in reducing the expected surplus over 1Q20, however, would still fall short of erasing it completely.”

For now, however, the is “remaining cautious and the action suggests that further cuts are rather unlikely in the near-term—however, an extension of current policy into mid-2020, is,” said Richey.

“With these expectations in mind, it is reasonable to anticipate a modest rally into the meetings later this week followed by a classic ‘sell the news’ reaction,” he said.

In other energy trade, January gasoline












RBF20, +0.26%










 fell 1.1% to $1.5733 a gallon, while January heating oil












HOF20, +0.13%










 gained 0.4% to $1.886 a gallon.

January natural-gas futures












NGF20, +0.64%










 added 2.1% at $2.329 per million British thermal units.

Source: Investing.com

LEAVE A REPLY

Please enter your comment!
Please enter your name here