Web Stories Tuesday, February 27

LONDON :Oil fell more than $1 on Wednesday as economic growth in China was a little short of expectations, raising concerns about future demand, while U.S. dollar strength dented investors’ risk appetite.

Brent crude futures fell $1.38, or 1.8 per cent, to $76.91 a barrel by 1428 GMT. U.S. West Texas Intermediate crude futures (WTI) were down $1.35, or 1.9 per cent, at $71.05.

Even the naval and air conflicts in the Red Sea have not been enough to support oil despite increased concern about tankers having to pause or reroute, increasing shipping costs and slowing deliveries.

China’s economy in the fourth quarter expanded by 5.2 per cent 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 per cent to a record high, indicating elevated demand even if it lagged some analysts’ expectations.

Other signs of steady Chinese demand have also appeared.

An optimistic OPEC also stuck to its forecast for relatively strong growth in global oil demand in 2024 and said on Wednesday that 2025 will bring a “robust” increase in oil use, led by China and the Middle East.

Additionally, the U.S. dollar hovered near a one-month high on Wednesday 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 U.S., 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.

In the Red Sea, tensions remained high after the U.S. mounted fresh strikes against Iran-aligned Houthi militants in Yemen on Tuesday after a Houthi missile hit a Greek vessel.

“While oil benchmarks may not reflect the Red Sea attacks, the realised price for oil and oil products for consumers has increased given the disruption to trade flows through the Red Sea and Suez Canal,” Vivek Dhar, mining and energy commodities strategist at the Commonwealth Bank of Australia, wrote in a note.

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