Oil fell slightly on Wednesday after falling sharply in the previous session amid concerns about weak demand stemming from the state of the global economy.
Brent futures for March delivery were down 13 cents, or 0.1%, to $81.97 a barrel as of 0511 GMT. West Texas Intermediate (WTI) crude fell 28 cents, or 0.3%, to $76.65 a barrel.
Both indicators fell more than 4% on Tuesday and Brent suffered the biggest one-day loss in more than three months.
Signs of a global recession, China’s sluggish recovery from rising COVID-19 cases, a strengthening US dollar, and declining risk sentiment are all factors that keep oil prices in check.
The Chinese government has increased export quotas for refined petroleum products in the first batch of 2023, signaling weaker domestic demand expectations.
The biggest oil exporter, Saudi Arabia, may lower its Asian flagship Arab Light crude prices further in February after falling to a 10-month low this month as concerns over supply continue to cloud the market.
The market remains concerned about the impact of macro factors such as downward economic pressure.
The head of the International Monetary Fund has warned that much of the global economy will have a tough year in 2023, as the main engines of global growth – the US, European countries, and China – all experience economic weakening.
The Fed had increased interest rates by 50 basis points in December after four consecutive increases of 75 basis points each. If the Fed intensifies interest rate hikes, it could slow the economy and have the effect of reducing fuel consumption.
The dollar, which gave oil some support, weakened on Wednesday after major gains in the previous session. A weakening dollar typically increases demand for oil, making dollar-denominated commodities more attractive to holders of other currencies.
According to a preliminary survey, US crude stocks have likely increased by 2.2 million barrels and distillate stocks have also fallen.
Industry group American Petroleum Institute (API) will release data on US crude oil inventories at 2030 GMT. The Energy Information Administration (EIA), the statistical arm of the US Department of Energy, will release its own figures at 1430 GMT on Thursday.
