By Onome Amuge
Oil prices plunged into bearish territory following the International Monetary Fund’s (IMF) report that a third of the world could be heading for recession in 2023, with the three biggest economies, the US, EU and China, seen to be slowing down simultaneously.
The IMF’s report was also supported by analysts at insurer Allianz who said the global economy was headed towards a recession in the coming months. They also predicted worldwide growth of just 1.4 per cent for 2023, down from 2.9 per cent in 2021, before rebounding to 2.8 per cent in 2024.
In response to the dire warnings over the state of the global economy,crude oil futures extended losses on Wednesday as March ICE Brent futures traded at $79.44 per barrel versusTuesday’s settle of $82.10 per barrel.
Similarly, West Texas Intermediate (WTI) declined to $74.46 per barrel compared to Tuesday’s settlement of $76.93 per barrel.
Also weighing on oil prices are concerns over the rapid spread of Covid in China as the country rolls back its zero-tolerance policy, which is expected to stunt growth for at least the first quarter of 2023. Though recovery is anticipated later in the year, analysts predict a tough first quarter in 2023 for the world’s second largest oil consumer.
Capital Economics expects China’s economy to contract by 0.8 per cent in the first quarter of 2023 before rebounding in the second quarter.
HSBC economists, in a recent research report, projected a 0.5 per cent contraction in the first quarter but an overall 5 per cent growth for the year.
On a positive note, analysts at Commerzbank said that ICE Brent crude could rebound to $100 per barrel by the second quarter of 2023 as demand improves on economic recovery.
“As soon as there are signs of an economic recovery in the key economic areas, Brent is likely to climb back towards the $100 per barrel mark. In our opinion, this will probably happen roughly from the second quarter of this year onwards,” Commerzbank said.
