Oil drops 5% after IMF cut economic growth outlook


Storage tanks are seen at Marathon Petroleum’s Los Angeles refinery, which processes domestic and imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel and other petroleum products, in Carson, California, USA , March 11, 2022. Photo taken with a drone. REUTERS/Bing Guan

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HOUSTON, April 19 (Reuters) – Oil prices fell 5% in volatile trading on Tuesday on demand concerns after the International Monetary Fund (IMF) cut its economic growth forecast and warned against rising inflation.

Prices fell despite lower production from OPEC+, which produced 1.45 million barrels per day (bpd) below its target in March, as Russian production began to fall following the sanctions imposed by the West, according to a report by the alliance of producers seen by Reuters. Read more

Russia produced about 300,000 bpd below its March target of 10.018 million bpd, based on secondary sources, the report said.

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Brent crude was down $5.56, or 4.9%, at $107.60 a barrel as of 11:28 a.m. EDT (1528 GMT), while U.S. West Texas Intermediate crude fell 5.56 $, or 5.1%, to $102.65.

The IMF cut its forecast for global economic growth by almost a percentage point, citing Russia’s invasion of Ukraine, and warned that inflation is now a “clear and present danger” for many country. Read more

The bearish outlook has added pressure on prices as the dollar trades at its highest level in two years. A stronger greenback makes commodities denominated in dollars more expensive for holders of other currencies, which can dampen demand.

St. Louis Federal Reserve Chairman James Bullard said on Monday that inflation in the United States was “far too high” as he repeated his argument for raising interest rates to 3.5% by the end of the year to slow what is now high inflation for 40 years. readings.

“This has caused the dollar to rally, which is putting downward pressure on oil,” said Price Futures Group analyst Phil Flynn.

Worries over demand growth were already front and center after a preliminary Reuters poll on Monday showed U.S. crude oil inventories likely rose last week.

China‘s economy slowed in March, worsening an outlook already weakened by COVID-19 restrictions and the conflict in Ukraine. Read more

However, fuel demand in China, the world’s biggest oil importer, could start to rise as manufacturing plants prepare to reopen in Shanghai. Read more

Tuesday’s price drop followed a more than 1% rise on Monday, when oil prices hit their highest level since March 28 due to disruptions in Libyan oil supplies.

The country’s National Oil Corp (NOC) warned on Monday of “a painful wave of shutdowns” and declared force majeure on some production and exports as eastern forces extended their blockade of the sector due to of a political stalemate. Read more

NOC declared on Tuesday a case of force majeure at the oil port of Brega.

The possibility of an EU ban on Russian oil following its invasion of Ukraine continued to keep the market on edge. French Finance Minister Bruno Le Maire said on Tuesday that an EU-level embargo on Russian oil was being prepared. Read more

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Additional reporting by Rowena Edwards in London, Mohi Narayan in New Delhi, Sonali Paul in Melbourne Editing by Marguerita Choy and David Goodman

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