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The latest climb in oil prices was briefly interrupted early on Tuesday morning as bearish sentiment continues to build. A forecast by the International Monetary Fund that a third of the world’s economies are about to slide into a recession this year was particularly worrying. At the same time, Chinese manufacturing data suggests a wave of Covid infections is hurting oil demand in the country.
Speaking on “Face the Nation” at CBS, IMF’s managing director Kristalina Georgieva said that the outlook for the global economy is quite grim and that 2023 will be tougher than 2022 because all the large growth engines will be depressed, including the United States, Europe, and even China—for the first time in four decades.
"For the first time in 40 years, China's growth in 2022 is likely to be at or below global growth," Georgieva said, as quoted by Reuters. "For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative," she also said.
The somewhat good news she had to deliver was that the U.S. economy may avoid an outright contraction thanks to its resilience, even though recent research from the Fed suggested a recession may well be imminent.
Oil prices slipped on Tuesday morning after rising for several consecutive sessions. The latest updates about the Covid situation in China also contributed to the slide although it remained quite moderate at less than 0.30 percent for Brent crude in morning Asian trade today.
At the time of writing, both Brent crude and West Texas Intermediate were on the rise again, also moderately. Both benchmarks have returned to over $80 per barrel in the past couple of weeks, after sliding considerably lower in November and early December on demand worry, especially in China.
"The market cannot expect a rapid recovery of the Chinese economy after three years of (pandemic controls), the mass bankruptcy of small and medium-sized enterprises, the soaring unemployment rate, the rapid increase in the social savings rate, and the rapid growth in the number of infections and deaths in recent months," Reuters quoted a CMC Markets analyst as saying.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.