Oil steady, traders hopeful on China demand but worried about Fed (updated)

NAGA AG

02/12/2024 04:54

* 
      Brent and WTI rose more than 1% earlier in the session
    

        * 
      China's factory activity expands in November
    

        * 
      Atlanta Fed President says open mind about whether to cut
rates 
    

        * 
      OPEC+ to discuss oil policy on Dec. 5 
    

  
 (Updates with settlement price at 2:30 p.m. ET)
    By Arathy Somasekhar
       HOUSTON, Dec 2 (Reuters) - Oil prices were little
changed on Monday, as hopes of stronger demand stemming from
higher factory activity in China was largely offset by concerns
that the U.S. Federal Reserve will not cut interest rates again
at its December meeting.
    Brent crude futures  LCOc1  settled 1 cent lower at $71.83 a
barrel. U.S. West Texas Intermediate crude  CLc1  rose 10 cents,
or 0.15%, to $68.10.
    A private sector survey showed China's factory activity
expanded in November at the fastest pace in five months,
boosting Chinese business optimism just as U.S. President-elect
Donald Trump has ramped up trade threats.
    Meanwhile, a ceasefire between Israel and Lebanon, which
took effect last Wednesday, appeared increasingly fragile. The
Israeli military said on Monday it was currently striking
"terror" targets in Lebanon amid mutual accusations of ceasefire
violations between Israel and Lebanese armed group Hezbollah.
    The Pentagon said that despite some incidents, the ceasefire
between Israel and Lebanese armed group Hezbollah was holding.
    "Increased geopolitical risks remain. Even though the
ceasefire is underway in Israel, it seems evident that there are
some misconceptions about the legitimacy of the ceasefire," said
Dennis Kissler, senior vice president of trading at BOK
Financial.  
    Traders also watched developments in Syria, weighing whether
recent escalation could widen tensions across the Middle East
and affect supply.
    Both crude benchmarks fell more than 3% last week, pressured
by easing supply concerns from the Israel-Hezbollah conflict and
2025 surplus forecasts, despite expected sustained output cuts.
    The Organization of the Petroleum Exporting Countries and
its allies, together known as OPEC+, postponed the group's next
meeting to Dec. 5. It will discuss delaying a planned oil output
increase scheduled to start in January, OPEC+ sources told
Reuters last week.
    "Attention will be on the potential delay of the planned
production hike, as an indefinite delay could alleviate downward
pressure on prices," said George Pavel, general manager at
Naga.com Middle East.
    This week's meeting will decide policy for the early months
of 2025.
    "Money managers are sitting on the fence ... the market is
looking for clarity between the implication of the forthcoming
Trump administration and OPEC+ supply policy," said Harry
Tchilinguirian at Onyx Capital Group.
    Pressuring oil prices, Atlanta Federal Reserve President
Raphael Bostic said he has an open mind about whether to cut
interest rates again at the Fed's December meeting, with
upcoming data on jobs important in shaping the decision.
    Higher interest rates increase the cost of borrowing, which
can slow economic activity and dampen demand for oil.]
    Also pressuring oil, the dollar pushed higher again, after 
Trump on Saturday threatened 100% tariffs on BRICS member
countries unless they commit to not creating a new currency or
supporting another currency that could replace the dollar. 
        A stronger greenback makes dollar-denominated oil more
expensive for investors holding other currencies, hurting
demand.
  

 (Reporting by Arunima Kumar in Bengaluru, Enes Tunagur in
London and Florence Tan and Gabrielle Ng in Singapore; Editing
by Jason Neely, David Goodman, Jonathan Oatis and David
Gregorio)
 ((Arathy.s@thomsonreuters.com))