Oil Stagnant Amid Sudden Fed Fears And China Optimism

Meanwhile, the Middle East ceasefire appears shaky: File Image/Pixabay

Monday's oil trading demonstrated again that sentiment is at best inconsistent, with prices largely unchanged as traders expressed hope for stronger demand in China and worried that the U.S. Federal Reserve will not cut interest rates this month.

Up until recently, worry over China fuelled bearish sentiment while expectations were high for Fed initiatives.

Brent settled down 1 cent at $71.83 per barrel, while West Texas Intermediate settled up 10 cents to $68.10.

The about-face regarding China was inspired by a survey showing that the country's factory activity growth hit a five-month high, with the Caixin/S&P Global manufacturing PMI rising to 51.5 in November from 50.3 the previous month.

Also, new orders placed with Chinese manufacturers increased at the fastest rate since Feb. 2023, while new export orders rose for the first time in four months and marked the highest in seven months.

On the flip side, investors grew jittery about the prospect of an interest rate cut, based on nothing more than Atlanta Federal Reserve president Raphael Bostic stating he has an open mind about whether to cut interest rates again this month, and that upcoming data on jobs would help make the decision.

Meanwhile, the optimism generated by last week's ceasefire between Israel and Hezbollah seemed to evaporate, as Israel continued to strike terror targets in Lebanon after Hezbollah was accused of violating the accord.

Dennis Kissler, senior vice president of trading at BOK Financial, remarked, "Even though the ceasefire is underway in Israel, it seems evident that there are some misconceptions about the legitimacy of the ceasefire."

Yet more gloomy sentiment was stoked on Monday by Macquarie Group strategists, who stated in a note that the prospect of the Organization of the Petroleum Exporting Countries (OPEC) returning supply to the market in January despite expectations for the cartel to hold steady "cannot be altogether dismissed"; they added that they would be "surprised but not shocked" if OPEC revived output.