Oil prices rise as markets become less worried about rising interest rates; China data under focus, Investing.com reports

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Investing.com – Oil prices rose in Asian trading on Monday as concerns about a Federal Reserve interest rate hike faded, although expectations for some economic data this week, particularly from China, made traders nervous.

The market was also encouraged by the prospect of tight supply after major suppliers Saudi Arabia and Russia said they would maintain ongoing supply cuts through the end of the year, signaling further tightening in the oil market.

Crude markets have remained battered over the past two weeks as traders priced in a much lower risk premium from an Israel-Hamas war and fears of supply disruptions in the Middle East have yet to materialize.

But those losses were mitigated somewhat by a weaker dollar as the Fed’s tightening signals faded and were weaker than expected, prompting market bets that the central bank would not raise rates.

Israel’s conflict with Hamas also shows no signs of escalating, as Israel has rejected calls for a ceasefire and there are reports that the Russian Wagner mercenary group plans to provide Hezbollah with air defense systems.

As of 19:13 ET (00:13 GMT), it was up 0.5% at $85.16/barrel and up 0.7% at $81.09/barrel. Both contracts plunged about 6% last week.

China trade and inflation data in focus

The crude oil market is now fully focused on key economic data from China due to be released later this week. China’s plan, launched on Tuesday, is expected to provide further signals on domestic commodity demand.

Although China’s oil imports and fuel demand remain strong this year, the country’s stockpiles have steadily increased, which may lead to lower imports in the coming months. Traders are also worried about falling fuel demand, especially if economic conditions worsen.

Thursday’s release is expected to provide further insight into spending patterns in the world’s largest oil importer, which has been battling deflation in recent months.

Although China’s economic growth has been stronger than expected, a series of weak data in October showed that business activity remained subdued and may indicate a soft fourth quarter.

However, Beijing is expected to roll out more economic support measures, notably issuing bonds worth 1 trillion yuan ($140 billion) in the fourth quarter.

A weaker dollar supports crude oil markets

Weak copper prices – which fell to a six-week low on Friday – helped ease some of the pressure on oil markets.

The dollar fell amid signs that the U.S. economy is cooling, with traders expecting the central bank to begin cutting interest rates in mid-2024.

While a weaker dollar is good for oil prices, a cooling U.S. economy could also weigh on demand in the world’s largest fuel consumer. U.S. fuel demand is likely to weaken in the coming months due to winter.

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