Oil prices declined by over $1 following reports that China, the world’s largest importer of the commodity, is struggling with growth.
This coupled with the persistent increase in the U.S. dollar value against its global counterparts dragged on the outlook of crude oil.
Brent crude oil, against which Nigerian oil is priced, shed $1.19 or 1.5% decline to settle at $77.10 per barrel by around 10 am Nigerian time while the U.S. West Texas Intermediate crude (WTI) declined by $1.21 or 1.7% to close at $71.19.
The focal point of these downward pressures on oil prices stems from the latest economic growth figures out of China, the world’s second-largest consumer of crude oil.
China’s economy expanded by 5.2% year on year in the fourth quarter, a figure that marginally missed analysts’ expectations.
The discrepancy between the actual growth rate and forecasted numbers has raised concerns about the potential impact on global oil demand, challenging predictions that Chinese demand would be a driving force behind 2024’s oil market growth.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, commented on the economic data, stating, “The Chinese outlook for 2024 and 2025 is still bleak,” emphasizing that the challenges facing crude oil demand persist.
While geopolitical tensions in the Red Sea and conflicts failed to provide the anticipated support to oil prices, a stronger U.S. dollar emerged as an additional factor contributing to the market’s unease.
The dollar’s proximity to a one-month high, fueled by comments from U.S. Federal Reserve officials suggesting a more measured approach to interest rate cuts, diminished investor risk appetite and reduced demand for dollar-denominated oil from international buyers using alternative currencies.
Despite these challenges, signs of steady demand from China emerged, with the country’s oil refinery throughput in 2023 surging by 9.3% to reach a record high.
However, the prevailing economic headwinds have introduced an element of uncertainty into the global oil market, leaving industry experts and investors cautiously observing how these dynamics will unfold in the coming months.
