Sluggish China Economy & Robust Dollar Push Oil Prices Down

Oil prices are facing downward pressure, largely due to a combination of factors: a sluggish economic recovery in China and a strengthening US dollar. This dynamic significantly impacts global energy markets.

China's Economic Slowdown Impacts Oil Demand

Oil prices fell around one per cent on Wednesday due to the sluggish economic recovery in China. Global oil demand growth continues to slow down amid underwhelming Chinese consumption, the International Energy Agency (IEA) said on Thursday, keeping its Oil prices fell by more than 2% on Monday after China's latest stimulus plan disappointed investors seeking demand growth in the world's second-biggest oil consumer. The limited impact of stimulus measures in the world's second-largest economy fuels anxieties about future demand.

Strong US Dollar Exerts Downward Pressure

The United States (US) Dollar ticked higher on Monday against other currencies in Asia and Europe as oil prices slip on a stronger US dollar. A robust dollar makes oil, which is typically priced in USD, more expensive for countries using other currencies, thereby dampening demand.

Recent Oil Price Movements

Oil prices saw a 1% decrease earlier this week, influenced by a sluggish economic recovery in China and the strengthening of the US dollar. Despite ongoing naval and air conflicts, Crude Oil futures along with Brent and WTI West Texas Intermediate concluded December 2025 with declines, driven by concerns over sluggish demand growth in. The naval and air conflicts in the Red Sea have not significantly offset the bearish sentiment created by economic factors.

Looking Ahead

The interplay between China's economic performance and the dollar's strength will continue to be a critical factor in determining oil prices in the near future. Investors will be closely monitoring economic data and policy decisions from both China and the United States.