Oil prices rose more than 1 per cent on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand and hints that the Organization of Petroleum Exporting Countries, OPEC, may deepen output cuts at its meeting this week indicated supply may tighten next year.
Consequently, Brent crude futures rose 74 cents, or 1.2 per cent, to $61.23 a barrel while the West Texas Intermediate, WTI, futures rose $86 or 1.6 per cent, to $56.03 a barrel, having risen by more than $1 earlier.
On Friday, WTI futures settled 5.1 per cent lower amid reduced volumes because of last week’s Thanksgiving Day holiday while Brent plunged 4.4 per cent. Prices fell on concerns that talks to end the trade war between the United States and China, the world’s two biggest oil users, would be disrupted by US support for protestors in Hong Kong.
But oil rose on Monday after factory activity in November in China, the world’s biggest oil importer, increased for the first time in seven months because of rising domestic demand amid government stimulus measures.
At the open prices remain supported by the surprising resilient China factory activity with the forward-looking PMI’s beating expectations,” said Stephen Innes, chief Asia market strategist at AxiTrader.
Prices were also supported after Iraq’s oil minister said on Sunday that Opec and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd.
The OPEC, and allies including Russia, known as OPEC+ are expected to at least extend existing output cuts to June 2020 when they meet this week.
The OPEC+ group has coordinated output for three years to balance the market and support prices. Their current deal to cut supply by 1.2 million bpd that started from January expires at the end of March 2020.
OPEC’s ministers will meet in Vienna on December 5 and the wider OPEC+ group will meet on December 6 to make a decision on the current agreement.
“All eyes are on OPEC this week,” Innes said.
Oil rose in November partly on expectations of the United States and China reaching an initial deal trade deal by the end of the year that would help restore global economic growth and future crude demand.
Beijing’s top priority in any phase one trade deal is the removal of existing US tariffs on Chinese goods, China’s Global Times newspaper reported on Sunday, a stance the US is unlikely to agree to.
The potential for no trade deal may weigh on oil prices next year, along with new supply that could create a glut, a Reuters poll showed on Friday.