TOKYO- Oil prices rose more than 1 percent on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.
Brent crude futures rose 74 cents, or 1.2 percent, to $61.23 a barrel. West Texas Intermediate (WTI) futures rose $86 or 1.6 percent, to $56.03 a barrel, having risen by more than $1 earlier.
On Friday, WTI futures settled 5.1 percent lower amid reduced volumes because of last week’s Thanksgiving Day holiday while Brent plunged 4.4 percent. 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 Organization of the Petroleum Exporting Countries (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 Dec. 5 and the wider OPEC+ group will meet on Dec. 6 to make a decision on the current agreement.
“All eyes are on OPEC this week,” Innes said.
The minister, Thamer Ghadhban, told reporters in Baghdad that the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, will consider increasing the cuts in their supply pact at meetings in Vienna this week.
Iraq, OPEC’s second-biggest oil producer behind Saudi Arabia, exported crude at an average rate of 3.5 million bpd in November, the oil ministry said on Sunday. Its total oil output averaged 4.62 million bpd in November, a Reuters survey showed.
Russian Energy Minister Alexander Novak on Friday said he would prefer OPEC and its allies to wait until nearer April before making a decision on whether to extend the oil output deal, the TASS news agency reported.
However, Novak’s position is likely be opposed by most of OPEC’s members as they seek to clinch a new deal at the Dec. 5-6 meeting in Vienna.
The agreement with the Kurdistan Regional Government (KRG) caps production from the northern Iraqi region at 450,000 bpd, Ghadhban said. About 250,000 bpd of the KRG’s output will be handed over to the central Iraqi government and 200,000 bpd will be used by the region to pay back debt to foreign companies, he added.
The minister also said that Iraq’s crude output has not been affected by anti-graft protests that broke out in early October across Baghdad and the oil-rich regions of the south.
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. – Reuters