Oil slips on rate hike worries, Russian crude flows despite China performance

Oil prices extended losses on Tuesday as the threat of further interest rate increases and continued Russian crude flows cancelled out demand recovery expectations from China.

March Brent crude futures fell 5 cents to $84.85 per barrel by 0415 GMT, while the more heavily traded April contracts fell by 32 cents or 0.38 per cent to $84.18 a barrel.

US West Texas Intermediate (WTI) crude futures slipped 33 cents, or 0.42 per cent, to $77.57 a barrel.

"Oil markets are facing downside pressure as risk-off trades prevail ahead of the Fed meeting, along with a strengthened USD," said CMC Markets analyst Tina Teng.

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The demand outlook is still uncertain as Russia's exports seem unaffected by sanctions, despite China's reopening, she added.

Investors expect the US Federal Reserve will raise interest rates by 25 basis points on Wednesday, with a half-point increase by the Bank of England and European Central Bank the following day. Higher rates could slow the global economy and weaken oil demand.

The market also turned its attention to a planned virtual meeting on February 1 at 1100 GMT of the ministers of the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia, a group known as OPEC+.

The panel is expected to recommend keeping the oil producer group's current output policy unchanged when it meets this week, five OPEC+ delegates told Reuters on Monday.

OPEC+ agreed in October to cut its production target by 2 million barrels per day (bpd), about 2 per cent of world demand, from November until the end of 2023.

Russia continues to supply the global market with its oil despite a European Union ban and G7 price cap imposed over its invasion of Ukraine, which pressured prices.

Decreases were cushioned stronger official purchasing managers' index (PMI) data from China pointing to potentially healthy demand going forward, as the country's non-manufacturing activity broke into expansion territory for the first time since September 2022.

The International Monetary Fund (IMF) has raised its 2023 global growth outlook slightly due to "surprisingly resilient" demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing abandoned its strict Covid-19 restrictions.