By Rowena Edwards
LONDON (Reuters) -Oil prices edged lower on Tuesday in volatile trade as weak demand data from China and a gloomy economic outlook weighed.
Brent crude futures fell 46 cents, or 0.54%, to $85.45 a barrel by 1017 GMT. U.S. West Texas Intermediate crude was down 38 cents, or 0.47%, at $79.88.
Both contracts rose by over $1 and Brent dropped $1 in earlier trading.
“Brent and WTI have recovered almost 15% from the lows a few weeks ago as traders continue to price in stronger Chinese demand,” Craig Erlam, senior market analyst at OANDA, said.
“The outlook remains highly uncertain though which should ensure oil prices remain highly volatile,” Erlam added.
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 continued to battle waves of COVID-19 infections.
In further bearish news, China’s factory activity shrank in December as 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 said on Sunday 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.
The market will be looking for indications from the U.S. Fed’s December policy meeting on Wednesday. The Fed raised 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.
(Reporting by Florence Tan and Trixie Yap in Singapore; Additional reporting by Chen Aizhu and Muyu Xu; editing by David Evans)