Oil extended its losses on Tuesday as the threat of interest rate hikes and continued Russian crude influx outweighed expectations of Chinese demand recovery.
March Brent crude futures fell 5 cents at 0415 GMT to $84.85 per barrel, while the more heavily traded April contracts fell by 32 cents or 0.38% to $84.18 a barrel. West Texas Intermediate (WTI) crude futures fell 33 cents, or 0.42%, to $77.57 a barrel.
Oil markets are in a rush to avoid potential risks ahead of the Fed meeting and face downward pressure from the strengthening US Dollar.
China’s reopening is important, but the demand outlook is unknown as the impact of sanctions on Russia’s crude oil and oil products is still unclear.
Investors expect the US Federal Reserve to raise interest rates by 25 basis points on Wednesday, and the Bank of England and the European Central Bank by half a point the next day. Higher rates could slow the global economy and weaken oil demand.
The market also focused on the virtual meeting of the ministers of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, scheduled at GMT 11:00 on February 1.
When the panel meets this week, the oil-producing group is expected to keep its current production policy unchanged.
OPEC+ agreed in October to lower its production target by 2 million barrels per day from November to the end of 2023, about 2% of world demand.
Russia continues to supply oil to the global market despite the European Union ban that suppresses prices and the G7 price ceiling imposed due to its invasion of Ukraine.
As China’s non-manufacturing activity entered expansion territory for the first time since September 2022, the declines were buffered by stronger official purchasing managers index (PMI) data pointing to potentially healthy demand going forward.
The International Monetary Fund (IMF) raised its 2023 global growth outlook slightly as the “surprisingly resilient” demand in the US and Europe, energy costs eased, and China’s economy reopened after Beijing dropped strict COVID-19 restrictions.
