Oil prices plunge after IMF downgrades global growth forecast
Oil prices fell more than 5% today as investors worried about a drop in demand after the International Monetary Fund cut its forecast for global growth.
In the evening, the price of Brent crude, the main international oil contract, was down 5.4% at $107.11 a barrel, while the main American oil contract, WTI, fell 5.5% to $102.30.
European stocks were all down at the close as traders worried about the IMF’s pessimistic outlook for 2022.
The IMF cut its global growth forecast for 2022 sharply to 3.6% in its latest outlook report on Tuesday, 0.8 percentage points lower than its previous estimate in January.
Energy prices are rising, debt levels are rising and shortages remain acute, the IMF noted, as multiple crises including the war in Ukraine and the coronavirus pandemic are fueling an acceleration in inflation.
“The economic effects of war travel far and wide – like seismic waves emanating from the epicenter of an earthquake,” IMF chief economist Pierre-Olivier Gourinchas said in the report.
The deterioration was more marked for the euro zone, which should now grow by 2.8% instead of 3.9%.
Michael Hewson, chief market analyst at CMC Markets UK, said “Tuesday’s sharp drop in oil prices is offsetting concerns that the start of a new Russian offensive on the Donbass region (in the east) could increase pressure on the EU to consider a comprehensive solution”. embargo on Russian oil and gas”.
Wall Street was up late in the morning, with all three major indexes posting increases of more than one percent, a marked change from Monday when markets were lower on concerns over rising interest rates. .
Hewson noted that the IMF’s cut in growth forecasts for the United States, from 4% to 3.7%, was more modest than that for the euro zone.
Asian markets diverged as the region weighed the impact of Covid lockdowns in China, analysts at investment firm Charles Schwab said in a note.
China’s economic growth accelerated in the first quarter of the year to 4.8%, official data showed on Monday, but the government warned of “significant challenges” ahead.