Oil prices dive after IMF cuts global growth forecast

Oil prices jumped by greater than 5 percent Tuesday as traders were involved in a drop in call after the International Monetary Fund reduced its international growth forecast.

Around 1530 GMT the price of Brent crude, the primary global oil settlement, was down 5.4 percent to $107.Eleven in step with the barrel, even as the primary US oil agreement, WTI, fell 5.5 percent to $102.30.

European stocks had been all down at close, as investors fretted over the IMF’s pessimistic outlook for 2022.

The IMF sharply downgraded its 2022 global growth forecast to 3.6 percent in its latest outlook report Tuesday, 0.8 percentage points lower than its previous 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 downgrade was sharper for the eurozone, which is now expected to grow by 2.8 percent instead of 3.9 percent.

Michael Hewson, the chief market analyst at CMC Markets UK, said Tuesday’s “sharp decline in oil prices offsets concerns that the start of a renewed Russian offensive on the Donbas region (in the east) could increase the pressure on the EU to look at a complete embargo on Russian oil and gas”.

Wall Street was up in late morning trading, with the three major indices reporting rises of more than one percent, a marked change from Monday when markets were lower over worries about higher 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 of the eurozone.

Asian markets diverged as the vicinity weighed the impact of Covid lockdowns in China, analysts at Charles Schwab investment firm stated in a word.

China’s financial boom elevated inside the first quarter of the year to 4.8 percent, reputable records showed Monday, however, the government warned of “tremendous demanding situations” beforehand.