LONDON (Web Desk) – The International Monetary Fund Monday cut its forecast for average oil prices to just below $60/b in 2019 from close to $70/b in its last World Economic Outlook in October on concerns about global economic growth.
Further out, the IMF predicted oil prices would also average just below $60/b in 2020, down from $66/ b in its previous report. It pointed to the increased volatility in oil prices since August due to the influences of US policy on Iranian oil exports and more recently fears of weakening global demand.
Crude prices hit a peak of $86/b in October as some in the market talked of a return to $100/b oil before plunging to just below $50/b in late December. Saudi Arabia and Russia both pumped at record highs in November as the US pressured the kingdom to pump more crude to keep prices low ahead of its re-imposition of sanctions on Iran.
The US then issued waivers to eight countries to continue purchasing Iranian crude, tanking prices and leading to a fear of an oversupplied market that OPEC is now struggling to ward off through a 1.2 million b/d production cut deal with its non-OPEC allies. OPEC officials have said they were blindsided and wrong-footed by the waivers.
The IMF predicted the global economy would grow 3.5% this year compared with an estimated 3.7% in 2018 and marks a downward revision from its October forecast, highlighting the risks from trade tensions between US and China.
A "greater-than-envisaged slowdown in China" was one of the factors that tilted global growth risks to the downside, the IMF said but kept its growth forecasts unchanged for China, which accounts for around a third of global growth.
"The further downward revision since October in part reflects carry over from softer momentum in the second half of 2018 -- including in Germany following the introduction of new automobile fuel emission standards and in Italy where concerns about sovereign and financial risks have weighed on domestic demand," the IMF said.
The institution also cited "weakening financial market sentiment as well as a contraction in Turkey now projected to be deeper than anticipated."