Oil dives 3.5%, trade choppy on worries about China, global economy

By Arathy SomasekharOil prices tumbled 3.5% in volatile trade on Tuesday, pressured by weak demand data from China, a gloomy economic outlook and a stronger U.S. dollar

Crude oil
Photo: Bloomberg
Reuters HOUSTON
3 min read Last Updated : Jan 03 2023 | 11:27 PM IST

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices tumbled 3.5% in volatile trade on Tuesday, pressured by weak demand data from China, a gloomy economic outlook and a stronger U.S. dollar.

Brent futures for March delivery fell $3.03 to $82.88 a barrel, by 11:45 a.m. ET (16:45 GMT). U.S. crude fell $2.81 to $77.45 per barrel.

In early trade, both contracts had risen more than $1 a barrel.

"There is plenty of reason for concerns here - the China COVID-19 situation and the fear of recession in the foreseeable future is putting pressure on markets," Mizuho analyst Robert Yawger said.

The Chinese government has raised export quotas for refined oil products in the first batch for 2023. Traders attributed the increase to expectations of poor domestic demand as the world's largest crude importer continues to battle waves of COVID-19 infections.

Another worry: China's factory activity shrank in December as surging infections disrupted production and weighed on demand after Beijing largely removed anti-virus curbs.

Adding to the gloomy economic outlook, IMF Managing Director Kristalina Georgieva on Sunday said the economies of the United States, Europe and China, the main engines of global growth, were all slowing simultaneously, making 2023 tougher than 2022 for the global economy.

The dollar, meanwhile, was headed for its largest one-day rise in over three months. A stronger dollar can crimp demand for oil, making the dollar-denominated commodity more expensive for holders of other currencies.

On Wednesday, the market will scour minutes of the U.S. Fed's December policy meeting. The Fed raised interest rates by 50 basis points (bps) in December after four consecutive increases of 75 bps each.

Also on the radar, U.S. December payrolls data is due on Friday. Analysts expect the data to show the labour market remains tight.

Commerzbank said it expects the global economic outlook to play a "much more important role" in oil price developments than production decisions taken by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known collectively as OPEC+.

The bank expects signs of economic recovery "in key economic areas" to push Brent back towards $100 a barrel, which it said could happen from the second quarter of the year onwards.

"The outlook remains highly uncertain, though, which should ensure oil prices remain highly volatile," said Craig Erlam, senior market analyst at OANDA.

(Reporting by Rowena Edwards Additional reporting by Florence Tan and Trixie Yap in SingaporeEditing by David Evans, David Goodman and David Gregorio)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :oil tradeGlobal economyChina

First Published: Jan 03 2023 | 11:27 PM IST

Next Story