Crude oil futures closed more than 4% lower on Tuesday (Jan. 3) as markets came under pressure from concerns about slowing demand in China. In addition, the global economy is expected to be sluggish.
- WTI crude futures fell $3.33, or 4.1%, to settle at $76.93 a barrel.
- BRENT crude futures fell $3.81, or 4.4%, to close at $82.10 a barrel.
The Chinese government has announced an increase in export quotas for petroleum products this year, which the market sees as a sign of weak domestic demand. China, the world’s largest crude oil importer, is still struggling with the COVID-19 pandemic. According to the Caixin/Markit survey, China’s manufacturing purchasing managers’ index fell to 49.0 in December from 49.4 in November, bringing the PMI below the 50 mark for five consecutive months. This indicates that manufacturing activity in China continues to decline.
The market was also pressured by concerns about the global economic outlook. The director of the International Monetary Fund (IMF) warned that the world economy will be in a more difficult situation in 2023. About 1/3 of the world economy will fall into recession.
In addition, the strong dollar makes dollar-settled crude oil contracts more expensive for holders who hold other currencies. The dollar index, which is measured against a basket of six major currencies, rose 0.95% overnight to 104.5070.
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Wednesday, January 4, 2022