Oil prices climb on cautious optimism

LONDON—World oil prices advanced Monday on cautious optimism after encouraging Chinese and eurozone economic data, and following the weekend’s eurozone debt crisis summit, analysts said.

New York’s main contract, light sweet crude crude for delivery in December, added 35 cents to $87.75 a barrel.

Brent North Sea crude for December rose 65 cents to $110.21 per barrel in early afternoon London trade.

“Crude oil prices continued the upside momentum, supported by stronger than expected economic data from China and (the) eurozone that boosted market confidence and … risk-appetite,” said Sucden analyst Myrto Sokou.

“In the macroeconomic front, Chinese flash PMI was reported at 51.1, back in expansionary territory.

“In the eurozone, industrial new orders data surged by 1.9 percent in August, beating analysts’ expectations about a 0.2-percent rise.”

Manufacturing activity in China hit a five-month high in October, HSBC said Monday, easing fears of a hard landing in the world’s second-largest economy.

The preliminary HSBC purchasing managers’ index (PMI) stood at 51.1 in October, up from 49.9 in September and the first time it has gone above 50 since June, the British banking giant said in a statement.

A reading above 50 indicates the sector is expanding, while a reading below 50 suggests a contraction. The data is crucial for traders because China is the biggest energy-consuming nation in the world.

Crude futures were also buoyed by optimism on global financial markets over the eurozone’s sovereign debt crisis.

European Union leaders and IMF chief Christine Lagarde hailed “good progress” after the first summit on Sunday aimed at overcoming a crisis that has threatened to pitch the world into a fresh recession.

However, they announced few details, vowing instead to reveal all at a second summit on Wednesday.

The news was enough to spark a major market rally in Asia, while European shares traded in a narrow range.

“We expect some further consolidation in the oil market ahead of the next meeting of the European leaders on Wednesday,” added Sokou.

“Thus, volume might be muted while high volatility and nervous trading are possible to dominate the markets.

“In the meantime, currencies’ movements will remain the key driver of oil direction, while it will be interesting to watch how the global equity markets will digest any (eurozone) news.”