Oil prices stagnate amid reduced demand expectations after IMF cuts growth forecasts
Inflationary pressure, reduced growth expectations and continuing coronavirus lockdowns in China are weighing down oil prices across both major benchmarks.
Brent Crude prices have fallen 0.25 per cent to $107 per barrel today, while WTI Crude has also slipped 0.33 per cent to $102.20 per barrel.
Inlfation is running rampant across developed economies, hitting 8.5 and 7 per cent across the US and UK respectively, with expectations of further interest rate hikes.
Prices have more or less been flat since yesterday, when the two benchmarks plummeted 5.2 per cent after the International Monetary Fund (IMF) cut its global growth forecast by almost a full percentage point
It noted the economic impact of Russia’s war in Ukraine and warned that inflation had become a clear and present danger for many countries.
Meanwhile, China’s continued Covid-19 restrictions and decrease in flights are also hitting prices, with the country being the world’s top crude importer.
Commerzbank analyst Carsten Fritsch suggested these factors are reducing expectations of global demand this year.
He said: “All of this is fuelling concerns about demand on the oil market, which had recently taken somewhat more of a back seat as supply risks dominated the headlines.”
Nevertheless, prices remain historically elevated above the $100 milestone, following market rallies last month which saw Brent Crude peak at a 14-year high of $139 per barrel.
Markets remain tight, with the Organization of the Petroleum Exporting Countries and its allies (OPEC+) produced 1.45m barrels per day below its production target in March.
Western sanctions, which initially caused prices to spike amid fears of supply disruption, are now weighing down prices with Russian output starting to decline.
However, if the European Union opts to ban Russian oil imports – this could cause markets to rally again, with the Kremlin cut off from its key market.
So far, the trading bloc has spent €12.5bn on Russian oil supplies since the country invaded Ukraine on February 24.