After the International Monetary Fund (IMF) lowered its economic growth estimates and warned of greater inflation, oil prices fell 5% in volatile trading on Tuesday, owing to demand concerns.
According to data obtained by Reuters from the producer alliance, prices fell despite decreased output from OPEC+, which produced 1.45 million barrels per day (BPD) below its expectations in March, as Russian supply began to decline following sanctions imposed by the West. find out more
According to secondary sources, Russia produced roughly 300,000 bpd less than its target in March, at 10.018 million BPD.
At 12:29 p.m. EDT (1629 GMT), Brent crude was down $5.62, or 5%, to $107.54 a barrel, while U.S. West Texas Intermediate crude was down $5.29, or 4.9 percent, to $102.92.
The IMF slashed its global growth projection by nearly a full percentage point, citing Russia’s invasion of Ukraine as the reason, and warned that inflation is now a “clear and present concern” for many countries. find out more
The dollar’s two-year high increased to pricing pressure due to the pessimistic outlook. With a stronger dollar, commodities priced in dollars become more expensive for holders of other currencies, thereby dampening demand.
President of the Federal Reserve Bank of St. Louis, James Bullard, stated on Monday that U.S. inflation is “far too high,” and argued that interest rates should be raised to 3.5 percent by the end of the year to lower what are now 40-year-high inflation readings.
The IMF’s reduced growth prediction, combined with the Strategic Petroleum Reserves announcing a 4.7 million barrel drop in emergency inventories on Monday, is “creating some anxiety,” according to Price Futures Group analyst Phil Flynn.
Concerns about demand growth were already in the spotlight after a preliminary Reuters poll on Monday revealed that crude oil inventories in the United States were likely to have climbed last week.
China’s economy slumped in March, exacerbating an already bleak outlook exacerbated by COVID-19 restrictions and the Ukraine conflict.