HOUSTON: Oil prices tumbled 3.5% in volatile trade on Tuesday, pressured by weak demand data from China, a gloomy economic outlook and a stronger US dollar.
Brent futures for March delivery fell $3.03 to $82.88 a barrel, by 11:45 a.m. ET (16:45 GMT). US 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 US 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.
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