Crude oil prices advanced and hovered below $87 a barrel during the Asian trading hours Monday as a bright economic outlook for China continued to offer support.
Light sweet crude for January delivery gained 0.21 percent or 18 cents to $86.91 a barrel in electronic trading on the New York Mercantile Exchange during the Asian trading hours. Brent crude oil futures for the February delivery rose 0.10 percent or 11 cents to $108.27 a barrel on the ICE futures exchange in London.
Signs of economic growth in China raised expectation of a hike in fuel demand. Investor sentiment turned positive Friday after a private survey showed China's manufacturing activity expanded to a 14-month high in December, suggesting that the world’s second largest oil consuming nation was regaining strength.
The HSBC Flash PMI, a measure of the nation-wide manufacturing, climbed to 50.9 in December, its highest level in 14 months, compared to 50.5 in November.
"We're just seeing a bit of consolidation after that uptick in China data improved sentiment. The market is looking for the next leg-up and that would have to do around talks involving the U.S. fiscal cliff," Ben Le Brun, a markets analyst at OptionsXpress in Sydney, told Reuters.
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Recent economic reports from the U.S. also suggest that the recovery in the world’s largest oil consuming nation was picking up. According to the data released Friday by the Federal Reserve, the industrial production, which measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities, rose 1.1 percent in November after a 0.4 percent decrease in October.
Meanwhile, the U.S. House of Representatives Speaker John Boehner has offered to raise marginal tax rates on those earning $1 million or more. Although this is well above President Obama’s $250k threshold, it does suggest some progress toward compromise. The change of stand by the Republicans is seen as an indication of a solution soon, but a deal is yet to be finalised even as the deadline nears.
On Friday, Light sweet crude for the January delivery gained 1 percent or 84 cents and settled at $86.73 a barrel on the New York Mercantile Exchange while Brent crude for the January delivery, which expired on Friday, rose 1.1 percent or $1.24 to $109.15 a barrel.