Oil slips 1% after IMF warning on growth

Around 7.25 pm, the March contract of Brent on the Intercontinental Exchange was trading at $85.01 per barrel, lower by 1.05% from its previous close. The February contract of West Texas Intermediate (WTI) on the NYMEX fell below the $80 per barrel mark and was trading 1.08% lower at $79.39 per barrel.

The IMF MD on Sunday said that 2023 will be tougher than 2022 for the global economy as major economies the US, Europe, and China would be witnessing an economic slowdown. “For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva was quoted by media reports.

“For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative,” she added.

The concerns of global slowdown have raised fears of a muted demand for oil. The US and China are the top two importers of crude oil.

“Both WTI and Brent crude traded lower as IMF warning of slowing economic growth in major global economies in 2023 weighed on demand outlook,” said a report by Kotak Securities. Further, slowing manufacturing data from China has accentuated the demand fears. Chinese manufacturing activity witnessed a contraction for a fifth straight month in December, amid rising covid-19 cases in the country. The Caixin Manufacturing Purchasing Managers Index (PMI) stood at 49.0 in December, weaker than last month’s reading of 49.4. A reading below 50 indicates contraction. China’s manufacturing sector is a major indicator for the economic condition of the country, as it is related to the country’s massive exports. Production slowed substantially in 2022 amid strict zero covid policy and the surge in covid cases later in the year.

Going ahead, investors would wait for minutes of the US Federal Reserve’s December policy meet. The minutes are scheduled to be released on 4 January.