Oil sinks 4%, trade shakes on worries about China and the global economy

Oil sinks 4%, trade shakes on worries about China and the global economy
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  • Brent registers biggest daily drop in more than three months
  • China increases export quotas for refined petroleum products
  • IMF director warns of slowing growth in major economies
  • Dollar registers its highest daily rise in more than two weeks

HOUSTON, Jan 3 (Reuters) – Oil prices fell 4% on Tuesday in volatile trade, pressured by weak demand data from China, a grim economic outlook and a stronger US dollar.

Brent futures for March delivery fell $3.81, or 4.4%, to $82.10 a barrel, the biggest one-day drop in more than three months.

US crude fell $3.33 to $76.93 a barrel, a loss of 4.1%, its biggest drop in more than a month. Both benchmarks were up $1 a barrel at the start of the session.

“There are many reasons for concern here: the China COVID-19 situation and fears of a recession in the foreseeable future are putting pressure on the markets,” Mizuho analyst Robert Yawger said.

the chinese government increase in export quotas for refined petroleum products in the first batch by 2023. Traders attributed the rise to expectations of weak domestic demand, as the world’s biggest crude oil importer continues to battle waves of infections.

The factory in China is also active shrank in december as rising infections disrupted production and hit demand after Beijing largely lifted anti-virus restrictions.

Adding to the gloomy economic outlook, IMF Managing Director Kristalina Georgieva said on Sunday that the economies of the United States, Europe and China were slowing simultaneously, making 2023 more difficult than 2022 for the Global economy.

The dollar posted its biggest one-day rise in more than 2 weeks. A strengthening may affect demand for oil as dollar-denominated commodities become more expensive for holders of other currencies.

On Wednesday, the market will review the minutes of the US Fed’s December policy meeting. The Fed raised interest rates by 50 basis points (bp) in December after four consecutive hikes of 75 bp each.

Oil stocks at the Cushing storage center rose about 176,000 barrels to 28.6 million barrels in the week to December 30, a broker said, citing Genscape data.

Crude stocks were expected to rise by 2.2 million last week, a preliminary Reuters poll showed on Tuesday.

On the supply side, the US government last week released 2.7 million barrels of oil from the Strategic Petroleum Reserves, while Chevron Corp. (CLC.N) The Pascagoula, Mississippi, refinery is ready to Receive first shipment of Venezuelan crudein almost 4 years, according to shipping documents seen by Reuters on Tuesday.

US oil production in 2023 It is expected to rise by an average of 620,000 barrels per day, according to the latest government estimates, a third less than the roughly 1 million bpd some forecasts called for earlier in the year. read more

Commerzbank said it expects the global economic outlook to play a “much larger role” in oil price developments than production decisions made by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known collectively like OPEC+.

The bank hopes that signs of economic recovery “in key economic areas” will push Brent back towards $100 a barrel, which could happen as of the second quarter of the year.

Reporting by Rowena Edwards Additional reporting by Florence Tan and Trixie Yap in Singapore Editing by David Gregorio and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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