Oil prices fell more than 5% Tuesday, as investors fretted about a reduction in demand after the International Monetary Fund lowered its global growth projection.
Brent crude, the main international oil contract, was down 5.4 percent to $107.11 per barrel at 1530 GMT, while WTI, the main US oil contract, was down 5.5 percent to $102.30.
At the closing, European markets were all down, as traders worried about the IMF’s bleak prediction for 2022.
In its newest outlook report on Tuesday, the IMF drastically lowered its global growth forecast for 2022 to 3.6 percent, 0.8 percentage points lower than its prior estimate in January.
Energy prices are surging, debt levels are rising and shortages remain acute, the IMF noted, as multiple crises including the Ukraine war and coronavirus pandemic fuel an acceleration of inflation.
“The economic effects of the war are spreading far and wide — like seismic waves that emanate from the epicenter of an earthquake,” IMF chief economist Pierre-Olivier Gourinchas said in the report.
The eurozone has been downgraded even more, with growth now forecast to be 2.8 percent rather than 3.9 percent.
Tuesday’s “dramatic decrease in oil prices counters fears that the launch of a renewed Russian onslaught on the Donbas region (in the east) will boost pressure on the EU to consider a comprehensive embargo on Russian oil and gas,” according to Michael Hewson, the chief market analyst at CMC Markets UK.
In late morning trading, Wall Street was higher, with the three major indices all rising more than 1%, a significant reversal from Monday when markets were negative due to concerns about increasing interest rates.
Hewson noted that the IMF’s cut to the US growth forecast, from 4.0 percent to 3.7 percent, was more modest than that to the eurozone.
Asian markets diverged as the region weighed the impact of Covid lockdowns in China, analysts at Charles Schwab investment firm said in a note.
China’s economic growth accelerated in the first quarter of the year to 4.8 percent, official data showed Monday, but the government warned of “significant challenges” ahead.
– Key figures around 1530 GMT –
London – FTSE 100: DOWN 0.2 percent at 7,601.28 points (close)
Frankfurt – DAX: DOWN 0.07 percent at 14,153.46 (close)
Paris – CAC 40: DOWN 0.8 percent at 6,534.79 (close)
EURO STOXX 50: DOWN 1.0 percent at 3,744.35 (close)
Tokyo – Nikkei 225: UP 0.69 percent at 26,985.09 (close)
Shanghai – Composite: DOWN 0.05 percent at 3,194.03 (close)
Hong Kong – Hang Seng Index: DOWN 2.28 percent at 21,027.76 (close)
New York – Dow: UP 1.1 percent at 34,812.40
Dollar/yen: UP at 128.55 yen from 126.54 yen
Euro/dollar: DOWN at $1.0793 from $1.0802
Pound/dollar: DOWN at $1.3001 from $1.3023
Euro/pound: UP at 83.01 pence from 82.87 pence
Brent North Sea crude: DOWN 5.4 percent at $107.11 per barrel
West Texas Intermediate: DOWN 5.5 percent at $102.30 per barrel