Oil futures: Crude retreats 3% amid IMF growth warning, dollar rebound
Quantum Commodity Intelligence - Crude oil futures Tuesday were in sharp retreat as economic growth warnings and Covid concerns dampened sentiment for the first trading day of the new year, while a strengthening dollar added to the downtrend.
March ICE Brent futures were trading at $83.26/b (1755 GMT), compared to the pre-holiday settle of $85.91/b.
At the same time, Feb23 NYMEX WTI was trading $77.97/b versus Friday's settle of $80.26/b.
The International Monetary Fund (IMF) flagged concerns over the holiday weekend that major economies would face challenges in 2023, predicting a third of the world could slip into recession.
Oil prices eased further as the Dollar Index rallied back to around 104.50 points, up nearly 1% on the day, making dollar-denominated oil imports more expensive.
IMF managing director Kristalina Georgieva told CBS News the new year is going to be "tougher than the year we leave behind… because the three big economies, the US, EU and China, are all slowing down simultaneously."
"We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people," she added.
Georgieva said that China, the world's second-largest economy, is likely to grow at or below global growth for the first time in four decades as Covid cases surge following the dismantling of the zero-Covid policy.
Flights
On December 26, China's National Health Commission downgraded Covid-19 from Class A to Class B, which means quarantine requirements for air passengers have been dropped.
Several countries, including the US, Japan, India and some European states, have introduced compulsory tests for passengers from China, while Morocco has banned visitors from China.
Meanwhile, EU officials will hold talks this week to coordinate any response to the infection surge across China after recent talks concluded without consensus.
The Lunar New Year later in January will also quickly come into focus, prompting fears of a further rapid spread and another dent in economic confidence.
The Chinese purchasing managers' index (PMI) slumped to 47.0 points in December from 48.0 in November, according to data from the National Bureau of Statistics (NBS), missing expectations according to a Reuters poll.
However, the relaxation of restrictions from China is expected to lift the world's second-largest economy after the first quarter, boosting oil demand.
"My take is that China's reopening will add to oil demand and it will gain momentum as the year goes on. China's demand growth should offset the recession demand impact," said Phil Flynn of The Price Futures Group.
