Oil falls as China's economic recovery disappoints, dollar strengthens
© Reuters. A view shows the Yan Dun Jiao 1 bulk carrier in the Vostochny container port in the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo LCO -2.13% Add to/Remove from Watchlist Add to Watchlist Add Position Position added successfully to:
+ Add another position Close CL -2.33% Add to/Remove from Watchlist Add to Watchlist Add Position
Position added successfully to:
+ Add another position Close CVX -2.43% Add to/Remove from Watchlist Add to Watchlist Add Position
Position added successfully to:
+ Add another position Close
By Paul Carsten
LONDON (Reuters) -Oil fell more than $1 on Wednesday as economic growth in China, the world's second-largest crude user, slightly missed expectations, raising concerns about future demand, while U.S. dollar strength dented investor's risk appetite.
Brent crude futures fell $1.19, or 1.5%, to $77.10 per barrel by 0902 GMT. U.S. West Texas Intermediate crude futures (WTI) were down $1.21, or 1.7%, at $71.19.
Even the ongoing naval and air conflicts in the Red Sea have not been enough to support oil, despite increased concerns about tankers having to pause or reroute, increasing shipping costs and slowing deliveries.
China's economy in the fourth quarter expanded by 5.2% year on year, missing analysts expectations and calling into question forecasts that see Chinese demand fuelling 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.
Additionally, the U.S. dollar hovered near a one-month high on Wednesday after comments from U.S. 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.
In the Red Sea, tensions remained high as the U.S. on Tuesday mounted fresh strikes against Iran-aligned Houthi militants in Yemen 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 (OTC:CMWAY), wrote in a note.
Oil falls as China's economic recovery disappoints, dollar strengthens
Recommended Reading
Dollar stabilizes ahead of key employment data; euro slips back
Dollar stabilizes ahead of key employment data; euro slips back Dollar stabilizes ahead of key employment data; euro slips back
Swiss financial regulator wants to be able to name and shame banks
Swiss financial regulator wants to be able to name and shame banks Swiss financial regulator wants to be able to name and shame banks
Thai central bank chief rejects talk of 'crisis', says gov't stimulus won't fix economy
Thai central bank chief rejects talk of 'crisis', says gov't stimulus won't fix economy Thai central bank chief rejects talk of 'crisis', says gov't stimulus won't fix economy
European stocks fall on rate cut uncertainity, weak Chinese growth data
European stocks fall on rate cut uncertainity, weak Chinese growth data European stocks fall on rate cut uncertainity, weak Chinese growth data
Indonesia central bank keeps rates unchanged, to be patient on easing
Indonesia central bank keeps rates unchanged, to be patient on easing Indonesia central bank keeps rates unchanged, to be patient on easing
Global investment flows set for 'modest' rise in 2024, UN trade body says
Global investment flows set for 'modest' rise in 2024, UN trade body says Global investment flows set for 'modest' rise in 2024, UN trade body says
Dollar steady as traders await US inflation data, bitcoin volatile
Dollar steady as traders await US inflation data, bitcoin volatile Dollar steady as traders await US inflation data, bitcoin volatile
Reaction to the final COP28 climate deal
Reaction to the final COP28 climate deal Reaction to the final COP28 climate deal
Stalled EU's AI Act talks resume
Stalled EU's AI Act talks resume Stalled EU's AI Act talks resume
Asia FX muted with US labor data in focus; Yen buoyed by BOJ
Asia FX muted with US labor data in focus; Yen buoyed by BOJ Asia FX muted with US labor data in focus; Yen buoyed by BOJ
Analysis-Global small-cap stocks lure bargain hunters after sluggish 2023
Analysis-Global small-cap stocks lure bargain hunters after sluggish 2023 Analysis-Global small-cap stocks lure bargain hunters after sluggish 2023
Spotify to axe 1,500 workers to cut costs
Spotify to axe 1,500 workers to cut costs Spotify to axe 1,500 workers to cut costs