Investing.com - Crude oil futures eased higher during U.S. afternoon hours Monday after data indicated manufacturing activity in the U.S. contracted for the first time in three months in November.
Sentiment remained supported after Greece announced the details of a debt buyback scheme, while encouraging Chinese data was also in focus.
On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD88.98 a barrel during U.S. afternoon trade, up 0.04% on the session.
Pushing oil off its highs, the Institute for Supply Management said in a report that its index of U.S. purchasing managers fell to 49.5 in November from a reading of 51.7 in October.
Analysts had expected the ISM index of purchasing managers to decline to 51.3 in November.
Meanwhile, a report from HSBC released earlier confirmed that manufacturing activity in China expanded for the first time in more than a year last month.
The final version of China’s HSBC Purchasing Managers Index rose to 50.5 in November from a final reading of 49.5 in October.
The data came after a report from the state-affiliated China Federation of Logistics and Purchasing over the weekend, which showed manufacturing activity improved to a seven-month high of 50.6 in November, up 0.4 point over October.
The U.S. and China are the world’s two largest oil consuming nations and manufacturing numbers are used as indicators for fuel demand growth.
Appetite for riskier assets found additional support after Greece launched a scheme to buy back its debt from private investors, as part of an agreement to unlock a new bailout package worth EUR44 billion.
Euro zone finance ministers were to hold talks in Brussels later in the day to discuss the terms of the new Greek aid deal, after Germany’s parliament gave it the green light on Friday. The ministers were also to discuss details of a EUR10 billion bailout for Cyprus.
Weakness in the dollar also contributed to oil’s strength. The euro hit a six-week high against the greenback, while the dollar index was down 0.35% to trade at 79.95, the weakest level since November 1.
Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.
But gains were limited as investors remained concerned over the looming fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1, unless a divided Congress and the White House can work out a compromise in the four weeks left before the deadline.
House of Representatives Speaker John Boehner spooked investors on Friday after saying there was a stalemate between Republicans and President Barack Obama’s administration.
He added that President Obama’s proposal of USD1.6 trillion in new tax revenue and less than USD400 billion in spending cuts was not “serious.”
There are fears that U.S. lawmakers will repeat the same political divisiveness that led Standard & Poor's to downgrade the U.S.’s AAA rating in August 2011 and tip the country back into a recession.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery added 0.4% to trade at USD111.62 a barrel, with the spread between the Brent and crude contracts standing at USD21.89 a barrel.