Oil slumps with focus on strong dollar, mixed China outlook

Bloomberg

Oil declined under pressure from a stronger dollar, even as traders weighed the outlook for China as the world’s largest crude importer reopens its economy.
West Texas Intermediate futures dropped as much as 1.8% to below $79 a barrel, reversing earlier gains. Global benchmark Brent also fell. The dollar rallied as much as 0.9%, making commodities priced in the currency less attractive.
In China, official data showed the economy ended the year in a major slump, and President Xi Jinping said that tough challenges remain. However, some measures of mobility in key urban areas have picked up in a sign that a wave of Covid infections may have peaked.
There are some signs traders have grown more optimistic about the market in recent days. Last week, money managers boosted net-bullish bets on the Brent benchmark by the most since July 2021.
“The dollar jumped on the first real trading day of the year, which should limit a further rise in oil prices,” said Jens Pedersen, a senior analyst at Danske Bank.
Crude eked out a small gain in 2022 in a year that was marked by huge volatility. Prices surged in the wake of Russia’s invasion of Ukraine, only to lose ground amid concerns about a global recession. In the new year, investors are tracking Russia’s reaction to sanctions on its
energy exports.
On Tuesday, WTI briefly traded above its 50-day moving average for the first time since November.