Oil recovers on China data and possible deeper OPEC cuts
LONDON, December 2, 2019 – Oil prices recovered on Monday amid China’s better-than-expected PMI data and expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allies may deepen output cuts at their meeting later this week.
Oil rose on Monday after China’s official Manufacturing Purchasing Index (PMI) released on Saturday came in at 50.2, showing expansion for the first time in seven months and indicating an increase in fuel demand. On Monday morning, the private Caixin/Markit PMI came in at 51.8, up from 51.7 in October and higher than the expected 51.4.
Having risen by more than $1 earlier in the day, the Crude Oil WTI Futures were at 56.09 by 10:48 PM ET (03:48 GMT), up 1.67%. International Brent Oil Futures went up 1.31% to 61.28.
“At the open, prices remain supported by the surprising resilient China factory activity with the forward-looking PMI’s beating expectations,” Reuters cited Stephen Innes, chief Asia market strategist at AxiTrader.
Investors are paying close attention to the meeting on December 5 and 6 where the OPEC and its allies are expected to agree to deepen the existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd and to extend the cuts to at least June 2020. The group’s current supply cuts of 1.2 million bpd started in January and will expire at the end of March 2020.
Crude prices plunged 5% last Friday as Russia sent out mixed signals on its commitment to extend production cuts, and US President Donald Trump signed two bills to support Hong Kong protests against Beijing, adding to the trade tensions between the world’s two biggest economies.
In November, oil prices rose on expectations of the two countries reaching a trade deal by the end of the year, but this latest development of fresh trade tensions may weigh on oil prices next year, along with new supply that could create a glut, a Reuters poll showed on Friday.