SYDNEY/SINGAPORE: Oil prices fell on Tuesday as signs of a spreading global economic slowdown stoked concerns over future fuel demand.
International Brent crude oil futures were at $62.26 per barrel at 0410 GMT, down 48 cents, or 0.8 percent, from their previous close.
US West Texas Intermediate (WTI) crude futures were at $53.44 per barrel, down 0.7 percent, or 36 cents.
China on Monday reported its lowest economic growth figure since 1990, with GDP rising by 6.6 percent in 2018.
“Slowing manufacturing activity in China is likely weighing on demand,” said Singapore-based tanker brokerage Eastport on Tuesday, adding that industrial slowdowns tended to be leading indicators that only gradually fed into lower demand for shipped oil products.
In a sign of spreading economic weakness, South Korea’s export-oriented economy slowed to a six-year low growth rate of 2.7 percent in 2018, official data showed on Tuesday.
This followed the International Monetary Fund on Monday trimming its 2019 global growth forecasts to 3.5 percent, down from 3.7 percent in last October’s outlook.
“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” IMF Managing Director Christine Lagarde told reporters.
Despite the darkening outlook, oil prices have been getting some support from supply cuts that started in late 2018 by the Organization of the Petroleum Exporting Countries (OPEC).
“The effects of OPEC-led cuts ... will undoubtedly place a price floor under crude oil,” said Singapore-based brokerage Phillip Futures on Tuesday.
Oil prices fall as economic growth worries spread
Oil prices fall as economic growth worries spread
- China on Monday reported its lowest economic growth figure since 1990, with GDP rising by 6.6 percent in 2018
- ‘The effects of OPEC-led cuts ... will undoubtedly place a price floor under crude oil’
Middle East war economic impact to depend on duration, damage, energy costs, IMF official says
- Katz: Prolonged increase in energy prices could unanchor inflation expectations
- IMF: 2026 global GDP outlook was solid, too early to judge war’s impact on growth
WASHINGTON: The Middle East war’s impact on the global economy will depend on its duration and damage to infrastructure and industries in the region, particularly whether energy price increases are short-lived or persistent, the International Monetary Fund’s number two official said on Tuesday.
IMF First Deputy Managing Director Dan Katz told the Milken Institute Future of Finance conference in Washington that if there is prolonged uncertainty from the conflict and a prolonged impact on energy prices, “I would expect central banks to be cautious and respond to the situation as it materializes.”
He said the conflict could be “very impactful on the global economy across a range of across a range of metrics, whether it’s inflation, growth and so on” but it was still early to have a firm conviction.
Prior to the US and Israeli air strikes on Iran and counterattacks across the region, the IMF had forecast solid global GDP growth of 3.3 percent in 2026, powering through tariff disruptions due in part to the continued AI investment boom and expectations of productivity gains.
Katz said that the economic impact from the Middle East conflict would be influenced by its duration and further geopolitical developments.
Earlier, the IMF said it was monitoring the conflict’s disruptions to trade and economic activity, surging energy prices and increased financial market volatility.
“The situation remains highly fluid and adds to an already uncertain global economic environment,” the Fund said in a statement issued from Washington. Katz said the IMF will look at the conflict’s direct impacts on the region, including damage to infrastructure, and disruptions to key sectors.
“Tourism is an important one. Air travel. Is there physical damage to infrastructure, production facilities, and the big industry in particular that everyone will be focused on is, of course, the energy industry,” he said.
Oil rose further on Tuesday as Iran vowed to attack ships passing through the Strait of Hormuz. Brent crude oil , the global benchmark, surged to $83 per barrel, up 15 percent from its level on Friday.
Katz said he expected central banks to “look through” a temporary rise in energy prices, given their focus on core inflation. But central banks could respond if a more persistent energy shock results in “a destabilizing of inflation expectations.”
He said the post-COVID inflation spike of 2022 was influenced by energy impacts from Russia’s invasion of Ukraine, with more pass-through from headline inflation to core inflation.
“And so I’m sure central banks, as they are thinking about how the geopolitical situation is translating into energy markets, will be looking at the lessons of the pandemic and seeing if they can apply any of those lessons in setting monetary policy,” Katz said.
