Oil prices tumbled 5% in volatile trading on Tuesday on demand concerns after the International Monetary Fund (IMF) reduced its economic growth forecasts and warned of higher inflation.
Prices fell despite lower output from OPEC+, which produced 1.45 million barrels per day (bpd) below its targets in March, as Russian output began to decline following sanctions imposed by the West, according to a report from the producer alliance seen by Reuters.
Russia produced about 300,000 bpd below its target in March at 10.018 million bpd, based on secondary sources, the report showed.
Brent crude was down $5.56, or 4.9%, at $107.60 a barrel at 11:28 AM EDT (1528 GMT), while US West Texas Intermediate crude fell $5.56, or 5.1%, to $102.65.
The IMF cut its forecast for global economic growth by nearly a full percentage point, citing Russia’s invasion of Ukraine, and warned that inflation is now a “clear and present danger” for many countries.
The bearish outlook added to price pressure from the dollar trading at a two-year high. A firmer greenback makes commodities priced in dollars more expensive for holders of other currencies, which can dampen demand.
St Louis Federal Reserve Bank President James Bullard said on Monday that US inflation is “far too high” as he repeated his case for increasing interest rates to 3.5% by the end of the year to slow what are now 40 year high inflation readings.
“It caused the dollar to rally which puts downward pressure on oil,” said Phil Flynn, an analyst at Price Futures Group.
Concerns over demand growth were already in focus after a preliminary Reuters poll on Monday showed US crude oil inventories are likely to have risen last week.
China’s economy slowed in March, worsening an outlook already weakened by Covid-19 curbs and the conflict in Ukraine.
Published in The Express Tribune, April 20th, 2022.
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