Brent, the benchmark for two thirds of the world’s oil, was 0.17 per cent lower at $88.06 a barrel at 11.10 am UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.04 per cent at $81.59 a barrel.
“Crude prices are wavering as the dollar stabilises and over exhaustion from China reopening headlines,” Edward Moya, senior market analyst at Oanda, said.
“The economy still could rollover and some energy traders are still sceptical on how quickly China’s crude demand will bounce back this quarter.”
Oil’s gains were also limited by the growing risk of a recession in the world’s largest economy.
The US Conference Board leading economic index, a basket of 10 indicators of economic activity, fell by 1 per cent in December, steeper than analysts’ estimates of a 0.7 per cent drop.
The index is now down 4.2 per cent between June and December 2022.
“The historical correlation of the leading index and periods of recession, suggest that the current falls are consistent with the US economy entering a recession in the near term,” Jeanne Walters, senior economist at Emirates NBD, said.
Oil futures gained for two straight weeks after China, the world’s second-largest economy and top crude importer, reopened its borders for the first time in three years, triggering a sharp rise in airline bookings.
China’s economy, which grew 3 per cent in 2022, is set to improve and is highly likely to reach a normal growth rate in 2023, Liu He, a Vice Premier, told the World Economic Forum in Davos last week.
However, Opec stuck to its global oil demand forecast for this year, despite the improving economic outlook in China.
The group still expects oil demand to grow by 2.2 million barrels per day this year, which is lower than its estimate of 2.5 million bpd growth for 2022, it said last week.
“This forecast remains surrounded by uncertainties including global economic developments, shifts in Covid-19 containment policies, and geopolitical tensions,” the group of oil producers said.
Opec said the demand for its crude this year will also remain unchanged at 29.2 million bpd.
“This week, we will learn a lot about the crude demand outlook after we hear earnings from the airlines and Chevron,” said Mr Moya.
“Oil should be stuck in wait-and-see mode until we learn more about the health and outlook of the US economy.”