Oil Prices Slide as the Global Economy Slows Down in 2023 Says IMF

Written by: Arjita Gupta

Edited by: Krutarth

Last Updated: January 03, 2023

On Tuesday, the oil prices fell from their highest levels on a stronger dollar in a month after the International Monetary Fund (IMF) signaled a warning that 2023 will be tougher as the major economies are now weakening. The U.S. West Texas Intermediate crude was down by 1.0% or 77 cents with the price marking $79.49 a barrel. The Brent crude future on the other hand dipped by 1.1% or 98 cents with a price marking $84.93 a barrel by 0148 GMT. The reason for the price slide is the strengthening of the U.S. dollar.

Not only oil but dollar-denominated commodities got more expensive for other countries holding different currencies. IMF Managing Director Kristalina Georgieva said that 2023 will be tougher than 2022 in terms of global economic growth because the financial acceleration is slowing down for the United States, Europe, and China. However, oil prices increased by 2% and more on Friday as WTI and Brent closed the year 2022 up 6.7% and 10.5%, respectively.

On 3 January 2023, the Societe Generale analysts said that in the week ending on 27 December 2022, commodities saw a bullish flow at $12.3 billion, the single largest weekly bullish flow for that particular year. The analysts also said that it is Brent where the commodity has the largest flow, and saw a bullish flow of $3.4 billion as Russia outlined to the EU its response and G7 put on a price cap on their nation’s crude exports that happen for the third parties.

From 1 February, President Vladimir Putin imposed a ban for 5 months on oil and crude products for countries following the price cap in the decree. The same decree also had a clause that states that Putin can overturn this ban in special events. To increase the export of diesel to 1.81 million tonnes from the Baltic seaport of Primorsk in January, Russia diverted the crude export from Europe to India and China.

The oil products exports in January from Tuapse are however said to go down to 1.333 million tonnes. China, the world’s second-largest oil consumer, and the largest crude importer have seen some of its cities recovering from COVID infections and resuming their regular activities, which raises the hope of an economic boost and an increase in oil demand.