Oil down over strong US dollar

By Sibel Morrow

Oil prices dipped on Wednesday amid concerns over China's economic growth and the strength of the US dollar.

The international benchmark crude Brent traded at $77.68 per barrel at 0723 GMT, a 0.77% decrease from the closing price of $78.29 a barrel in the previous trading session on Tuesday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $71.85 per barrel, down 0.92% from Tuesday's close of $72.52 per barrel.

​​​​​​​The US dollar's strength, following the Federal Reserve's hints at less aggressive interest rate cuts, has made oil more expensive for buyers using other currencies, potentially dampening demand.

China is a key player in global oil consumption, but its 5.2% growth rate in the last quarter of last year was less than projected, casting doubt on the predicted surge in oil demand, according to figures released by China's National Bureau of Statistics (NBS).

China's oil refinery activity, however, increased significantly in December, indicating a continued, if not accelerated, demand for oil.

The NBS data revealed that China's oil refinery activity surged to record levels in 2023, marking a significant turnaround from the previous year's decline.

China processed around 734.8 million metric tons of crude oil last year. This figure translates to approximately 14.7 million barrels per day (bpd), a sharp increase from the 13.5 million bpd recorded in 2022.

The resurgence in refinery activity is largely attributed to the operation of new plants across the country, which have ramped up production to meet the post-pandemic surge in fuel consumption.

In December, the NBS data revealed a 1.1% increase in refinery throughput compared to the same month in the previous year, processing 60.11 million tons, or about 14.16 million bpd.

While slightly lower than the previous month's, the figure underscores the steady recovery and robust demand in China's oil sector as the country navigates its way out of the pandemic's economic impacts.

Meanwhile, tension in the Red Sea region continues to fuel investor and supply concerns and is indirectly driving up oil prices.

Recent US strikes against Houthi militants in Yemen, following a missile attack on a Greek vessel, have heightened concerns over the security of oil shipments in the region.

While not significantly impacting oil prices directly, the Red Sea attacks have increased the cost of oil for consumers due to disruptions to trade routes.