OIL PRICE - LONDON. Oil prices edged lower in volatile trade on Tuesday as weak demand data from China, a gloomy economic outlook and a stronger U.S. dollar weighed.
Brent crude futures fell $1.07, or 1.25%, to $84.84 a barrel by 1447 GMT. U.S. West Texas Intermediate crude was down $1.15, or 1.43%, at $79.11, having shed more than $2 earlier in the session.
Both contracts had risen more than $1 in early trade.
"Brent and WTI have recovered almost 15% from the lows a few weeks ago as traders continue to price in stronger Chinese demand," said Craig Erlam, senior market analyst at OANDA.
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"The outlook remains highly uncertain, though, which should ensure oil prices remain highly volatile."
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.
In further bearish news, China's factory activity shrank in December as the surging COVID-19 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 that 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.
Prices are also under pressure from a stronger dollar , which makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on demand.
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The market will be looking for indications from the U.S. Fed's December policy meeting on Wednesday. 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, which is expected to show that the labour market remains tight.
Looking ahead, 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.
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