Oil prices steadied in morning trading on Tuesday after falling by about 1 per cent the previous day amid concerns that further interest rate increases would dampen fuel demand.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.49 per cent higher at $82.90 a barrel at 10.45am UAE time.
West Texas Intermediate, the gauge that tracks US crude, was up 0.74 per cent at $76.24 a barrel.
On Monday, Brent settled 0.85 per cent lower at $82.45 while WTI was down 0.84 per cent at $75.68.
“Oil seems like it will stay heavy as both tensions between the two largest economies and recession worries grow,” said Edward Moya, a senior market analyst at Oanda.
“This week, we will have a better handle on global manufacturing activity, with many traders fixating on China's recovery.”
Strong US manufacturing data in January stoked fears of more aggressive interest rate increases.
Orders for non-defence capital goods, excluding aircraft, a measure of core business investment, rose by 0.8 per cent in January, after dipping 0.1 per cent a month earlier, according to the US Commerce Department.
However, orders for headline durable goods, which are meant to last at least three years, dropped by 4.5 per cent last month.
Minutes released by the US Federal Reserve last week showed that policymakers expect continuing interest rate increases to bring inflation back down to their long-term goal of 2 per cent.
Most officials agreed to reduce the pace of rate increases to 25 basis points but a few recommended an increase of 50 bps to bring the Fed Funds rate to a level they consider “sufficiently restrictive”.
Expectations of additional interest rate raises have lent support to the dollar.
The US Dollar Index, which measures the value of the dollar against a selection of major currencies, has risen by about 2.5 per cent in the past month. It was up 0.15 per cent at 104.83 on Tuesday.
A stronger dollar makes oil, which is denominated in the greenback, more expensive for holders of other currencies.
Investors will be closely following the most recent US crude inventory figures, which are set to be released by the American Petroleum Institute on Tuesday and by the Energy Information Administration on Wednesday.
These reports will provide additional indications regarding the demand for oil.
“Oil prices are on track for another monthly close lower as concerns that tighter interest rate policy in the US will prompt a slowdown in the economy, outweigh the reopening of China’s market,” said Edward Bell, senior director of market economics at Emirates NBD.
Brent is down by about 4 per cent since the start of the year even as China, the world’s second-largest economy and top crude importer, reopens its economy after following a strict zero-Covid policy for nearly three years.
The International Energy Agency expects global oil demand to surge to record levels this year on China’s recovery.
Global oil demand will rise by 2 million barrels per day to 101.9 million bpd in 2023, the agency said in its February oil market report.
It had previously forecast a growth of 1.9 million bpd.
