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On Monday, oil prices climbed above $90 for the first time in over a month, as encouraging data from China subdued concerns about going off the fiscal cliff.
Those worries have helped keep oil prices mired in the $85-$90 range after flirting with $100 in mid-September.
But positive manufacturing data from China, the hopes for a fiscal cliff resolution and a subsequent market rally, along with the ever-present risk of violence and chaos in the Middle East, are all sending oil prices higher today.
Those factors, as well as several others, should keep the pressure on for higher oil prices.
The chances of China's slowing economy triggering a global recession have weighed on oil prices, but recent positive manufacturing numbers from the world's leading exporter suggest activity is picking up.
For November, China's manufacturing Purchasing Managers' Index, compiled by HSBC Holdings plc (NYSE ADR: HBC), crossed the 50 point level, the dividing line between expansion and contraction.
The 50.5 reading, up from 49.5 in October, marks the first time in 13 months the index has been on the expansion side, and echoes China's government-backed PMI report, which showed a 50.6 reading for November, up from 50.2 in October.
"The numbers out of China are improving, the economy there is gaining momentum," Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London told Bloomberg News. "If we have some indication that a deal of sorts can be struck in Congress we could have a solid rebound in the market. The political posturing is going to continue for a while yet."
And, if a deal is made that actually leads to a recovery, oil prices and the energy sector as a whole will benefit more than others.
"With the up-and-down cycles we have witnessed over the last 18 months, an overriding [downward] trend has emerged. A pronounced move down in the market as a whole has usually resulted in energy share prices falling faster," Money Morning Global Energy Strategist Dr. Kent Moors recently said. "But when the recovery occurs, energy not only leads shares up, but by a stronger rate than the initial descent."
A fiscal cliff resolution, which Moors expects to happen, will boost the energy market - but here's why oil prices should trend upward next year regardless of what happens concerning the "cliff."
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