SINGAPORE: Oil prices saw little movement on Tuesday but the outlook for demand was dampened by a weak manufacturing activity survey from China and the IMF chief's warning that the world economy was in for a challenging year. Brent crude futures recovered from their early weakness when prices fell $1 a barrel to 38 cents, or 0.44%, at $86.29 a barrel by 0737 GMT.

US West Texas Intermediate crude was up 51 cents, or 0.64%, at $80.77 a barrel. "It's probably going to be a volatility play," said Serena Huang, head of APAC analysis at Vortex. Vandana Hari, founder of Vanda Insights in Singapore, claimed that not much had changed in the last weeks of December.

But there are some variables that are in flux, primarily the economy and China's COVID exit, and accounting for those is difficult," he continued.

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A weak factory survey from China, the second-biggest consumer of oil and the world's biggest crude importer, was unfavourable. The Caixin/Markit Manufacturing Purchasing Managers' Index decreased from 49.4 in November to 49.0 in December.

For five consecutive months, the index has remained below the 50-point range that separates expansion from contraction.

According to Leon Li, an analyst at CMC Markets in China, "The market is not expecting a rapid recovery in the Chinese economy after three years of (epidemic control), massive failure of small and medium-sized businesses, skyrocketing unemployment rate, could." A rapid increase in the social savings rate, and a rapid increase in the number of infections and deaths in recent months."

It came after reports that China's government had increased the first batch of oil product export quotas for 2023 by a larger amount than anticipated.

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Some traders attributed this to fears of weak domestic demand as the country battled waves of COVID-19 infections.

IMF Managing Director Kristalina Georgieva said on Sunday that the main drivers of global growth—the United States, Europe and China—were all slowing down at the same time, making 2023 more challenging than 2020 for the global economy. . This further dims the outlook.

Oil prices were up more than 2% on Friday, with Brent and WTI prices up 10.5% and 6.7% respectively in 2022 over the past year. The week ending Dec. 27 saw the biggest weekly inflow of money into commodities during 2022, according to analysts at Societe Generale, according to a Jan. 3 note from their research.

$3.4 billion of the $12.3 billion that flowed into commodities that week went into Brent, largely in response to Russia's belligerent response to price caps that the EU and G7 imposed on Russian crude exports to third parties .

For a period of five months from 1 February, President Vladimir Putin froze the supply of crude and oil products to countries adhering to the cap.

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Additionally, he included a provision in his decree allowing him to ignore the ban under certain circumstances. From Europe, Russian crude has been diverted to India and China.

   Moscow intended to increase diesel exports from the port of Primorsk on the Baltic Sea to 1.81 million tonnes in January, but exports from Tuapse were forecast to drop to 1.333 million tonnes.