Oil little changed as markets weigh China data, Fed rate cut

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices were steady on Monday, as optimism around strong 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 slipped 8 cents, or 0.13%, to $71.75 a barrel by 12:40 p.m. EST (1740 GMT) while U.S. West Texas Intermediate crude eased 3 cents, or 0.04%, to $67.99.

A private sector survey showed China's factory activity expanded at the fastest pace in five months in November, boosting Chinese business optimism just as U.S. President-elect Donald Trump ramps up his trade threats.

Meanwhile, a ceasefire between Israel and Lebanon, which took effect last Wednesday, appeared increasingly fragile. Lebanese authorities said that at least two people were killed on Monday in Israeli strikes on southern Lebanon.

Israeli Prime Minister Benjamin Netanyahu said on Monday that Israel would respond "strongly" after the Iran-backed Lebanese armed group Hezbollah, citing repeated Israeli ceasefire violations, carried out a strike on an Israeli military position.

The Pentagon said on Monday 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.



Hurting prices, however, Atlanta Federal Reserve President Raphael Bostic said on Monday 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.

Source: Investing.com