Oil Mixed as Chinese Demand Improves, US Interest Rate Cut Remains Unclear

Yesterday, Brent crude futures depreciated by 1 cent to trade at $71.83 a barrel, while the US West Texas Intermediate (WTI) crude rose by 10 cents or 0.15 per cent to $68.10 per barrel.

New data showed China’s factory activity expanded in November at the fastest pace in five months as the Caixin/S&P Global manufacturing PMI rose to 51.5 in November from 50.3 the previous month, the highest since June.

This boosted Chinese business optimism after US President-elect Donald Trump pledged an additional 10 per cent tariff on imports from China.

He had previously threatened to end China’s most-favoured-nation trading status and slap tariffs on Chinese imports as high as 60 per cent, which is much higher than those imposed during his first term.

On the geopolitical front, a ceasefire between Israel and Lebanon, which took effect last Wednesday, appeared to be shaky as it has not halted fighting.

Israel said on Monday that it was currently striking terror targets in Lebanon amid mutual accusations of ceasefire violations between Israel and the Lebanese armed group Hezbollah.

Meanwhile, the US, which was instrumental in the deal said the ceasefire between Israel and Lebanese armed group Hezbollah was holding.

Traders also watched developments in Syria, weighing whether recent escalation could widen tensions across the Middle East and affect supply.

Rebels linked to Al-Qaeda took some territories in the high-conflict country over the weekend, and this has added to more worries about the stability of the Middle East region. This may trigger another spate of crises after years of civil war in the country.

The Organisation of the Petroleum Exporting Countries and its allies, together known as OPEC+, postponed the group’s next meeting to December 5.

The meeting will discuss delaying a planned oil output increase scheduled to start in January.

Market analysts noted that attention will be on the potential delay of the planned production hike, as an indefinite delay could alleviate downward pressure on prices.

This Thursday’s meeting will decide policy for the early months of 2025.

There are also signals that the US may decide not to cut interest rates again at the Federal Reserve’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.

Pressure also came as the Dollar strengthened after Mr Trump on Saturday threatened 100 per cent tariffs on BRICS member countries if they create a new currency or support another currency that could replace the Dollar in trade.

A stronger greenback makes Dollar-denominated oil more expensive for investors holding other currencies, hurting demand.