September 30, 2022

Dubai Week

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Oil fell 5% after the International Monetary Fund cut its economic growth forecast

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Oil prices fell more than 5% on Tuesday after the International Monetary Fund cut its economic growth forecast and warned that inflation would rise.

OPEC + Group’s production fell despite falling prices, which produced 1.45 million barrels more than its target level in March, while Russian production began to decline following sanctions imposed by the West. Producer alliance seen by Reuters.

Brent crude traded down $ 5.8 or 5.2 percent at $ 107.28 a barrel at 1600 GMT.

US West Texas Intermediate crude trades were down $ 5.7 or 5.28% to $ 102.50.

On Tuesday, the International Monetary Fund cut the global economy’s expected growth by a full percentage point, blaming Russia’s war on Ukraine, and warned that inflation was a “clear and current danger” for many countries.

The International Monetary Fund, in its latest report on the outlook for the world economy, said it expects war to slow growth and increase inflation, noting that its expectations are coming to light in “unusually high uncertainty”.

Additional sanctions on the Russian energy sector, an escalating war, a sharper recession in China than expected, a renewed outbreak of the epidemic could slow growth and further inflation, while higher prices could cause social unrest.

The Fed, which cut its forecast for the second time this year, expects global growth to be 3.6 percent in 2022 and 2023, 0.8 and 0.2 percentage points lower than the January forecast, considering the direct effects of the war on Russia and Ukraine. And its global implications.

“Global economic prospects have plummeted due to the Russian invasion of Ukraine,” said Pierre-Olivier Gorincha, economic adviser and director of research at the IMF, in a blog post released today with revised forecasts.

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The war has already exacerbated rising inflation in many countries due to epidemic supply and demand imbalances, and recent locking operations in China could cause new disruptions in global supply chains.

The war, which Russia describes as a “special military operation”, has caused a catastrophic humanitarian crisis in Eastern Europe, displacing nearly five million Ukrainians to neighboring countries.

The economies of Russia and Ukraine are expected to shrink sharply, while the EU’s growth forecast for 2022 has been slashed by 1.1 percentage points.

“War adds to the chain of supply shocks that have hit the world economy in recent years,” Corinza said. Like seismic waves, their effects are widespread … through commodity markets, trade and financial connections.