Investing.com — Oil prices recovered lost ground to settle just marginally higher Wednesday as the dollar retreated, though worries about the demand limited upside after Chinese economic growth data disappointed.
By 19:30 ET (14:30 GMT), the futures settled up 0.2% at $72.56 a barrel and the contract dropped 0.3% to $78.09 a barrel. Both contracts had been down more than 2% intraday.
Chinese GDP disappoints
Chinese grew 5.2% year-on-year in the fourth quarter, slightly less than expected as the world’s largest oil importer continued to grapple with a sluggish post-COVID recovery.
While this still beat a 5% government target for 2023, the rise was largely driven by a lower base for comparison from 2022, when the economy grew about 3%.
Wednesday’s reading set a weak tone for Chinese economic growth in 2024, which spells a weaker appetite for crude in the coming months. While Chinese oil imports still hit record highs in 2023, their pace of growth was seen slowing towards the end of the year, amid high inventory levels.
Dollar strength wanes despite easing March Fed cut bets
The strength in the dollar, which has kept a lid on prices, waned, providing a reprieve for oil prices even data showing U.S. surprised to the upside cast further doubt on a March rate cut.
Uncertainty over when the will start cutting interest rates has helped the dollar rebound this year to one-month highs after being hard hit at the end of 2023.
A stronger dollar makes commodities, including oil, which are denominated in the U.S. currency, more expensive for foreign buyers, likely reducing demand.
OPEC offers 2025 growth forecast for first time
There was some good news for the market Wednesday, as the Organization of the Petroleum Exporting Countries stuck to its forecast for relatively strong growth in global oil demand in 2024 in its .
The group forecast demand growth of 2.25 million barrels per day for 2024, unchanged from last month, and predicted world oil demand will rise by 1.85 million barrels per day in 2025, led by China and the Middle East.
The 2025 prediction is OPEC’s first in its monthly report, and has published this earlier than usual in an attempt to reduce market uncertainty .
However, the cartel may still need to cut production further to keep oil prices at current levels in the face of stuttering demand growth and high U.S. output, the CEO of commodities trader Mercuria Energy Group said on Wednesday.
The released its estimate of U.S. crude inventories later in the session, a day later than usual due to Monday’s public holiday.
Red Sea tensions remain in play
Traders continue to monitor the military action in the Middle East, and the prospect of supply disruptions from the oil-rich region.
Disruptions in the Red Sea have seen several shipping operators steer clear of the region and instead take a longer route around the Cape of Good Hope- which is expected to delay oil deliveries to Europe and Asia.
(Ambar Warrick contributed to this article.)
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