Oil In "Ping-Pong" Doldrums As Attention Alternates Between Economy And China

However, "surprising" economic growth is reported throughout Europe: File Image/Pixabay

Ongoing worries on Tuesday about the global economy trumped enthusiasm over China's reopening in the wake of that country abandoning its zero-Covid lockdown policy, resulting in crude wiping out the previous session's modest gains and sinking over 1 percent.

Brent settled down $1.02, or 1.2 percent, at $83.05 per barrel while West Texas Intermediate for March, which expired on Tuesday, fell 18 cents, or 0.2 percent, to $76.16 per barrel.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "We seem to be fading off on the same, old concerns that the dollar is going to be strong and about the interest rate situation."

That aside, all signs continue to be bullish about the world economy despite headwinds: following analytical consensus that China's crude imports may rise between 500,000 and 1 million barrels per day (bpd) this year to as high as 11.8 million bpd, news on Tuesday showed better than expected business activity in Europe and Britain.

Specifically, S&P Global's flash Composite Purchasing Managers' Index (PMI) for the 20 countries that use the euro (and which is regarded as a reliable gauge of the bloc's overall economic health), climbed to a nine-month high of 52.3 in February from January's 50.3.

Business activity in Germany returned to growth for the first time in eight months in February thanks to improved underlying demand.

Also, the S&P Global/CIPS UK Composite Purchasing Managers' Index jumped to 53.0 in February from 48.5 in January, above the 50 threshold for growth for the first time since July.

Allan Monks, an economist at J.P. Morgan, said, "The report poses a clear challenge to the BoE's central view that a long recession and rise in unemployment will bring inflation down such that further rate increases are not required."

But despite promising forecasts, trading activity of late is what Bloomberg described as "listless swinging," and Rebecca Babin, a senior energy trader at CIBC Private Wealth, pointed out that, "Brent continues to ping-pong between the $80 and $85 level as the U.S. hard landing narrative collides with China's reopening narrative.

"We just keep replaying the same narratives and end up where we started."