NEW YORK: Oil fell around 1% on Wednesday as economic growth in China was short of expectations, stoking worries about energy demand and as the US dollar strengthened.
Brent crude futures fell 82 cents, or 1.1%, to $77.47 a barrel by 11:11 a.m. EDT (1611 GMT). US West Texas Intermediate crude futures (WTI) were down 51 cents, or 0.7%, at $71.89.
The naval and air conflicts in the Red Sea have not supported oil prices despite mounting concern about tankers having to pause or reroute, raising shipping costs and slowing deliveries. Tensions remained high after the US mounted fresh strikes against Iran-aligned Houthi militants in Yemen on Tuesday after a Houthi missile hit a Greek vessel.
China’s economy in the fourth quarter expanded by 5.2% year on year, missing analysts expectations and calling into question forecasts that Chinese demand will fuel 2024 global oil growth.
The economic data “doesn’t end the headwinds over crude oil demand, the Chinese outlook for 2024 and 2025 is still bleak,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“(The) oil industry was backing the notion that, despite a bumpy recovery, oil demand from China has been resilient and will likely reach record levels in 2024.”
Still, China’s oil refinery throughput in 2023 rose 9.3% to a record high, indicating elevated demand even if it lagged some analysts’ expectations.
Other signs of steady Chinese demand have also appeared. Limiting oil price losses on Tuesday, an optimistic OPEC stuck to its forecast for relatively strong growth in global oil demand in 2024. OPEC said on Wednesday that 2025 will bring a “robust” increase in oil use, led by China and the Middle East.
“The report suggests the market is going to be undersupplied,” said Phil Flynn, an analyst at Price Futures Group. Meanwhile, the US dollar hovered near a one-month high after comments from Federal Reserve officials lowered expectations for aggressive interest rate cuts. A stronger dollar reduces demand for dollar-denominated oil from buyers using other currencies.
“Higher rates can lead to a weaker outlook for oil demand as economic activity tends to cool in a high interest rate environment, leaving oil prices vulnerable,” Sachdeva said.
Also in the US, oil refiners are expected to have 1.5 million barrels per day (bpd) of capacity offline for the week ending Jan. 19, decreasing available refining capacity by 954,000 bpd, research company IIR Energy said on Wednesday.
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