Oil mixed amid weak China economic data, hopes for better 2023
Oil prices were mixed on Tuesday after China posted its weakest annual economic growth in nearly half a century, with its late-2022 U-turn in COVID-19 policy underpinning hopes of a recovery in the country's fuel demand this year.
Brent crude futures edged up by 7 cents, or 0.1%, to $84.52 by 0727 GMT, recouping some of the 1% loss in the previous session.
U.S. West Texas Intermediate (WTI) crude futures slid 73 cents, or 0.9%, to $79.15 from Friday's close. There was no settlement on Monday because of the U.S. public holiday for Martin Luther King Day.
"Brent crude has gained nearly 10% over the past 10 days as optimism over China's reopening boosted sentiment. However, the outlook for the rest of the global economy is uncertain," ANZ commodities analysts said in a client note.
ANZ also pointed to a jump in crude supply from Russia weighing on the market, with seaborne exports having risen to 3.8 million barrels per day last week, the highest level since April.
China's gross domestic product expanded 3% in 2022, badly missing the official target of "around 5.5%" and marking the second-worst performance since 1976, as the last quarter was hit hard by stringent COVID curbs and a property market slump.
The poor economic data still beat analysts' earlier forecasts as Beijing's roll back of its zero-COVID policy in December shored up consumption.
Data released on Tuesday also showed China's oil refinery output in 2022 had fallen 3.4% from a year earlier, its first annual decline since 2001, although daily December oil throughput rose to the second-highest level of 2022.
"With a stronger end to 2022 than we had expected, plus indications of stronger retail expenditure ahead, the outlook for GDP growth in 2023 has improved compared to our prior outlook," ING Chief Economist, Greater China Iris Pang said in a note.
But Pang warned that China still faced considerable headwinds, including likely recessions in the United States and Europe this year.
In a bearish survey released at the annual World Economic Forum in Davos, two-thirds of private and public sector economists polled expected a global recession this year, with about 18% considering it "extremely likely".
A survey of chief executives' views by PwC was the gloomiest since the firm launched the poll a decade ago.
A rise in the dollar from sevenmonth lows also put pressure on oil prices, as a stronger greenback makes oil more expensive for those holding other currencies.
Brent crude fell 64 cents, or 0.8%, to US$84.64 a barrel by 0525 GMT, while U.S. West Texas Intermediate crude was at US$79.30 a barrel, down 56 cents, or 0.7%, amid thin trade during a US public holiday.
Both contracts rose more than 8% last week, the biggest weekly gains since October and that may have spurred some short-term selling to lock in the profits from the move higher.
"After the scale of the move last week, we could be seeing some profit taking," said Warren Patterson, ING's Head of Commodities Strategy, adding that thinner trading volumes would make any selling appear to be more pronounced.
Prices continued to hover near 2023 highs on Monday. China's crude imports rose 4% year-on-year in December, while an expected resurgance in travel for the Lunar New Year holiday at the end of the week is brightening the outlook for transportation fuels.
Traffic levels in China are continuing to rebound from record lows following the easing of Covid-19 restrictions, resulting in stronger demand for crude and oil products, ANZ analysts said in a note.