Oil slides on MF slow-growth expectations

Singapore, January 3 (BNA): Oil prices fell on Tuesday from their highest levels in a month after Chinese economic data dampened market sentiment and the head of the International Monetary Fund warned of a tough 2023.

Brent crude futures fell 25 cents, or 0.29%, to $85.66 a barrel by 0400 GMT, while US West Texas Intermediate crude recorded $80.06 a barrel, down 20 cents, or 0.25%, Reuters reported.

Weaker factory data from China, the world’s largest crude importer and second largest oil consumer, weighed on prices. The Caixin/Markit manufacturing PMI fell to 49.0 in December from 49.4 in November. The index remained below the 50-point level that separates growth from contraction for five consecutive months.

However, there was a return to regular activity in China on Monday, as some people in major cities braved the cold and a surge in coronavirus cases, raising the prospect of a boost in the economy and oil demand as more infections recover.

This came after news of a larger-than-expected increase in the first batch of oil products export quotas for 2023 issued by the Chinese government. A few traders attributed this to expectations of weaker domestic demand as the country continued to battle waves of COVID-19.

Moreover, International Monetary Fund Managing Director Kristalina Georgieva said on Sunday that the United States, Europe and China — the main drivers of global growth — are all slowing simultaneously, making 2023 a more difficult year than 2022 for the global economy.

Oil prices settled more than 2% higher on Friday, with Brent and WTI ending 2022 up 10.5% and 6.7% in the previous year, respectively.

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Societe Generale analysts said in a Jan. 3 note that commodities saw a large $12.3 billion in inflow in the week ending Dec. 27, the largest single weekly inflow in 2022.

“The commodity with the largest inflows was Brent crude, which saw an upward inflow of $3.4 billion as Russia outlined its response to the European Union and G-7 imposing price caps on the country’s crude oil exports to third parties,” the analysts said.

President Vladimir Putin banned the supply of crude oil and petroleum products from February 1 for a period of five months to countries that adhered to the cap. His decree also included a clause allowing him to override bans in special cases.

Russian crude was diverted to India and China from Europe. Traders said Moscow plans to increase diesel exports from the Baltic Sea port of Primorsk to 1.81 million tonnes in January, but exports from Tuapse are expected to fall to 1.333 million tonnes.

Looking ahead to the coming months, DBS Bank’s lead energy analyst Suvro Sarkar expects concerns about a global economic slowdown to compete with the pace of China’s reopening to continue to drive oil prices.

“A weaker dollar will help to some extent, (while) short-term factors will include inventory updates and data on Russian supplies,” he said.






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