Oil sinks as dour IMF forecast sparks global growth concerns

Oil extended losses after the IMF downgraded its global growth forecast, intensifying market concerns of an economic slowdown in the wake of hawkish comments from U.S. Federal Reserve officials.

Oil extended losses after the International Monetary Fund downgraded its global growth forecast, intensifying market concerns of an economic slowdown in the wake of hawkish comments from U.S. Federal Reserve officials.  

West Texas Intermediate fell more than US$5 to settle below US$103 on Tuesday, the sharpest drop in more than a week. The IMF slashed its world growth forecast by the most since the early months of the COVID-19 pandemic and projected even faster inflation. The market opened on a downbeat after Fed Reserve Bank President James Bullard said late Monday the central bank needs to move quickly to raise interest rates to quell inflation.

China’s health officials said the COVID Zero approach will continue, with the country deploying strict lock downs that are snarling up the world’s second-largest economy. Recent data shows China’s economic growth slowing, which has heightened concerns about demand falling in one of the world’s biggest crude importer. 

“It’s a fairly supplied market for now and one which doesn’t look like we’re in crisis mode at this point, but one where we do need to get more production,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Still, production issues in Libya are providing a bullish element to the market. The nation’s oil output has fallen to about 800,000 barrels a day. The Sharara field in the west of the country, which can pump 300,000 barrels a day, has been closed as protests spread.