Oil fell more than 1% as growth fears offset hopes for Chinese demand

By Stephanie Kelly

NEW YORK (Reuters) – Brent crude fell more than 1 percent in a volatile session on Tuesday as lingering concerns about global economic growth overwhelmed supply constraints and prompted investors to take profits from the previous day’s gains.

Focus in the broader financial market is firmly on Wednesday’s release of the minutes of the US Federal Reserve’s latest meeting, after recent data raised the risk that interest rates will remain higher for longer.

Global benchmark Brent crude was down $1.02, or 1.2%, at $83.05 a barrel.

U.S. West Texas Intermediate (WTI) crude for March delivery on Tuesday was down 18 cents, or 0.2 percent, at $76.16 a barrel. The contract for the second month was down 19 cents, or 0.2 percent, at $76.27.

Price moves today “appear to be more technical in nature,” said Phil Flynn, analyst at Price Futures Group. “It looks like we’re softening because of the same, old concerns that the dollar will be strong on the interest rate situation as well.”

A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies. (USD/)

Earlier in the session, the market rallied, with Brent briefly turning positive after better-than-expected surveys of business activity in Europe and the UK pointed to a less bleak European economic outlook than previously feared.

Oil prices rose more than 1 percent on Monday on optimism over Chinese demand, which analysts expect to rebound this year after restrictions related to COVID-19 are lifted.

The WTI contract did not close on Monday due to a public holiday in the United States, which also delayed by a day both the weekly industry and official US oil inventory reports on Wednesday and Thursday, respectively.

U.S. crude stockpiles have risen weekly for about two months, and a Reuters poll estimated they would have risen by 1.2 million barrels last week.

However, signs of tighter supply gave prices some support.

Russia plans to cut crude output by 500,000 barrels a day, or about 5 percent of its production, in March after the West imposed price caps on Russian oil and oil products following the invasion of Ukraine.

The cut, announced this month, will for now only apply to March production, Deputy Prime Minister Alexander Novak said on Tuesday, according to news agency reports.

Russia is part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, which agreed in October to cut oil production targets by 2 million bpd by the end of 2023.

Separately, in the natural gas market, US regulators approved the partial restart of the Freeport LNG plant in Texas, the second largest US liquefied natural gas export plant, which was shut down after a fire in June.

(Reporting by Stephanie Kelly in New York Additional reporting by Alex Lawler in London, Sudarshan Varadhan in Singapore and Yuka Obayashi in Tokyo Editing by Marguerita Choy and Susan Fenton)