Oil falls as China's economic recovery disappoints

DAVOS, Switzerland, Jan 17 (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 US dollar strength dented investor's risk appetite.
Brent crude futures fell $1.26, or 1.6 per cent, to $77.03 per barrel by 1158 GMT. US West Texas Intermediate crude futures (WTI) were down $1.35, or 1.9 per cent, at $71.05.
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 per cent 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 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.
Additionally, the US 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 US, 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.
Meanwhile, Global oil markets will cope with Red Sea disruptions in the short run, although prolonged attacks by the Houthis on ships would lead to a shortage of tankers due to longer voyages and a supply delay, the CEO of Saudi oil giant Aramco said.
Amin Nasser told Reuters he expected the oil market to tighten after consumers depleted stocks by 400 million barrels in the last two years, which left OPEC's spare capacity as the main source of additional supply to meet rising demand.