By Ambar Warrick
Investing.com -- Oil prices were muted in early trade on Tuesday as optimism over better-than-expected economic data from China was offset by caution over an upcoming Federal Reserve meeting and an OPEC decision on production.
Chinese business activity grew more than expected in January, government data showed, indicating that the country’s economy was clearly on a path of recovery after it relaxed most anti-COVID restrictions earlier in the month.
The data helped further the notion that a Chinese economic recovery will help spur increased crude demand in 2023. The International Energy Agency recently forecast that crude demand will rise to record highs in 2023 on the back of a Chinese recovery.
But anticipation of a slew of central bank meetings this week and fears of a near-term supply glut limited gains in oil prices. Crude markets were also nursing steep losses from Monday.
Brent oil futures rose 0.2% to $84.60 a barrel, while West Texas Intermediate futures were flat at $77.95 a barrel by 21:03 ET (02:03 GMT).
Both contracts plummeted over 2% on Monday as recent data indicated that Russian oil exports were set to rise despite recent price curbs imposed by the West. Monday's losses put oil prices on course for a 1.6% to 3.2% loss in January.
Strength in the dollar also weighed on crude markets, as investors pivoted into the greenback in anticipation of the Fed meeting. The central bank’s outlook on monetary policy will be closely watched, given that recent signs of resilience in the U.S. economy give the Fed more headroom to raise interest rates.
Markets remained wary that more interest rate hikes could further stymie near-term demand. While the Fed is widely expected to hike interest rates by 25 basis points (bps) on Wednesday, the European Central Bank and Bank of England are both expected to raise rates by 50 bps each this week.
Focus is also on an upcoming meeting of ministers from the Organization of Petroleum Exporting Countries and allies (OPEC+) on Wednesday. While the cartel is widely expected to keep production rates steady, any moves to the contrary could cause a swing in oil prices.