Oil Slides as IMF Cuts Growth Expectation in China
Crude oil prices fell overnight as the International Monetary Fund slashed its forecast for China’s 2022 GDP, due in part to challenges surrounding its zero-COVID policy, OANDA analyst Jeffrey Halley said in a Wednesday note.
The supply outages in Libya have been overshadowed by the prospect of lower growth in China, which would result in lower oil consumption. Demand is expected to be pressured given the economic paralysis in Shanghai and other cities in China.
Brent crude dropped 4.60% to $107.50 per barrel and West Texas Intermediate prices fell 5.0% to 102.60 per barrel overnight Tuesday.
In Asia, local buyers have piled in to buy the dip, resulting in Brent edging up 0.90% to $108.21 per barrel and WTI gaining 0.98% to $103.56 per barrel early Wednesday. READ: Oil Prices Near 7-Year High on Tight Supply
Both Brent and WTI continue to suffer from illiquidity in the futures markets as high volatility and raising margins impact volumes, Halley said. The start of the second Russian offensive in Ukraine is expected to lead to more price volatility, according to Halley.
Both the International Monetary Fund and the World Bank downgraded their global growth forecasts, sending crude oil prices lower, on fears of demand rationing due to elevated energy prices and China’s zero-COVID approach expected to keep demand low, Australia’s ANZ Bank said in a Wednesday note.
Market sentiment was further dampened by talks around an aggressive rate hike, the bank noted. The market has also shrugged off supply risk from an upcoming package of sanctions, according to ANZ Bank.
The European Commission president said the bloc is developing “smart mechanisms” to be able to include oil in the next round of sanctions, indicating a higher likelihood of oil being added to the package, the bank said.
In Libya, supply disruptions are continuing, with output falling to 800,000 barrels per day after the shut-down of the Sahara field, which otherwise yields 300,000 b/d, ANZ Bank said. #Oil Slides as IMF Cuts Growth Expectation in China
