Oil Declines as US Product Inventories Surge, China Inflation Remains Weak

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Oil prices dropped in Asian trading on Thursday as investors reacted to data showing an unexpected rise in U.S. product inventories, along with weak economic figures from China, the world's largest oil importer.

Crude prices were also pressured by a stronger dollar, as hawkish signals from the Federal Reserve increased expectations that interest rate cuts will occur at a slower pace in 2025. Brent crude for March delivery fell by 0.5% to $75.79 per barrel, while West Texas Intermediate (WTI) crude dropped by 0.5% to $72.30 per barrel.

China's inflation data remained subdued in December, with the consumer price index showing little change, and the producer price index shrinking for the 27th consecutive month.  This reflects limited progress in China's ongoing disinflationary trend, even amid aggressive stimulus measures from the government.

As the world's largest oil importer, China's economic slowdown raises concerns about weakening oil demand. Additionally, the incoming Trump administration’s plan to impose trade tariffs on China adds to these worries.

In the U.S., gasoline and distillate inventories surged far more than expected in the week leading up to January 3. Gasoline inventories rose by 6.3 million barrels, far exceeding the anticipated 0.5 million, and distillate inventories increased by 6.1 million barrels. Meanwhile, crude oil inventories declined less than expected by 0.96 million barrels, compared to a forecasted 1.8 million barrel drop.

The build-up in product inventories marks the eighth consecutive week of significant increases and raised concerns about cooling demand in the U.S., the world’s largest fuel consumer. While cold weather has spurred heating demand, it has also disrupted travel, further affecting fuel consumption.

The strengthening of the dollar also added pressure to crude prices, as the greenback hit a two-year high on hawkish signals from the Federal Reserve. A stronger dollar makes oil more expensive for international buyers, reducing demand.

Paraphrasing text from "Investing.com" all rights reserved by the original author.