Harvest Global Markets :

On Wednesday, the price of oil experienced a decline of more than $1, attributed to China’s economic growth, which fell slightly below expectations. This raised concerns about future oil demand, especially as the strength of the U.S. dollar diminished investors’ appetite for risk. Despite ongoing naval and air conflicts in the Red Sea, which typically lead to concerns about shipping disruptions and increased costs, oil prices did not receive support.

China’s fourth-quarter economic expansion of 5.2% year-on-year fell short of analysts’ predictions, casting doubt on forecasts that anticipated Chinese demand to drive global oil growth in 2024. According to Phillip Nova, a senior market analyst at Phillip Nova, this data indicates persistent challenges for crude oil demand. Although the oil industry had hoped for a resilient recovery in Chinese oil demand, 2024 and 2025 still appear uncertain.

Despite these challenges, there have been signs of steady demand from China. Additionally, the U.S. dollar remained near a one-month high on Wednesday due to comments from U.S. Federal Reserve officials, which reduced expectations of aggressive interest rate cuts. A stronger dollar tends to reduce demand for oil priced in dollars among buyers using other currencies. Moreover, higher interest rates can dampen the outlook for oil demand by cooling economic activity, thereby making oil prices vulnerable.Brent crude futures experienced a decline of $1.19, or 1.5%, settling at $77.10 per barrel, while U.S. West Texas Intermediate crude futures (WTI) dropped by $1.21, or 1.7%, reaching $71.19.

Tensions remained elevated in the Red Sea, with the U.S. conducting fresh strikes against Iran-aligned Houthi militants in Yemen after a Houthi missile hit a Greek vessel. Although these events may not be fully reflected in oil benchmarks, the actual prices paid by consumers for oil and oil products have risen due to disruptions in trade flows through the Red Sea and the Suez Canal, as noted by Vivek Dhar, a mining and energy commodities strategist at the Commonwealth Bank of Australia (OTC:CMWAY).