Oil Prices Tumble 5% When the IMF Lowers Its Growth Forecast

Prices fell despite decreased production from OPEC+, which produced 1.45 million barrels per day (bpd) less than its goal in March, as Russian supply started to plummet as a result of Western sanctions over Russia's invasion of Ukraine, according to a report obtained by Reuters from the producer alliance.

Russia produced around 300,000 barrels per day less than its aim of 10.018 million barrels per day in March, according to secondary sources.

OPEC+, which consists of OPEC and its partners headed by Russia, decided last month to increase oil production by 432,000 barrels per day (bpd) in May, defying demand from big customers to produce more.

The IMF cut its global economic growth projection by almost a full percentage point, citing Russia's invasion, and warned that inflation has become a "clear and present risk" for many nations.

The negative prognosis exacerbated pricing pressure already exerted by the dollar's two-year high. A stronger dollar increases the cost of commodities priced in dollars for holders of other currencies, which might depress demand.

President of the Chicago Federal Reserve Bank Charles Evans said Tuesday that the Fed may boost its policy rate goal range to 2.25 percent to 2.5 percent by year's end, but would likely need to raise rates further if inflation continues elevated.

Meanwhile, St. Louis Federal Reserve Bank President James Bullard said Monday that US inflation is "far too high," as he argued for raising interest rates to 3.5 percent by the end of the year in order to lower what have already reached 40-year highs.

The IMF's reduced growth prediction, along with the Strategic Petroleum Reserves' warning on Monday that emergency inventories declined by 4.7 million barrels, is "creating some worry," according to Phil Flynn, an analyst with Price Futures Group.

Concerns about demand growth were already in the spotlight after a preliminary Reuters poll on Monday that indicated 8849|US crude oil inventories likely increased last week.

China's economy faltered in March, exacerbating an already bleak picture exacerbated by COVID-19 restrictions and the Ukraine war.

China, the world's top oil importer, may see an increase in fuel consumption as industrial units prepare to restart in Shanghai.

Tuesday's price fall follows a more than 1% increase on Monday, when oil prices reached their highest level since March 28 due to Libyan oil supply delays. Libya's National Oil Corporation (NOC) warned Monday of a "painful wave of closures" and imposed force majeure on certain production and exports as eastern troops stepped up their embargo of the industry amid a political deadlock.

NOC imposed force majeure at the Brega oil port on Tuesday.

Boris Johnson, the Prime Minister of the United Kingdom, emphasized the need of increasing pressure on Russia via more sanctions and diplomatic isolation during a call with Western leaders on Tuesday.

The prospect of a European Union-imposed embargo on Russian oil kept the market on edge. French Finance Minister Bruno Le Maire stated Tuesday that an EU-wide ban was being considered.