In a notable upswing, oil prices witnessed a rise following the publication of encouraging economic forecasts by the International Monetary Fund (IMF). The IMF recently revised its global growth estimates for 2023, reflecting promising economic activities observed during the first quarter. The latest forecast projects a 3% GDP growth for 2023, marking a 0.2 percentage point increase from the previous April publication. However, the forecast for 2024 remains unaltered at 3.0%.
As a result of the positive news from the IMF, WTI (West Texas Intermediate) crude oil surpassed the $79 threshold, reaching $79.05 by 10:52 am ET, with a notable gain of $0.31 (0.39%) for the day. Similarly, Brent crude experienced a surge, surmounting $83 with an increase of $0.29 (+0.35%).
The trajectory of oil prices will now be influenced by estimates from the American Petroleum Institute (API), which is set to release its data on U.S. crude oil and crude products inventories later in the day.
Despite the improved forecast, the IMF’s projection still indicates a certain level of economic fragility, falling short of the average 3.8% GDP growth witnessed in the previous decade.
According to Pierre-Olivier Gourinchas, the chief economist at the IMF, the outlook for the next five years points to growth hovering around 3.0%, potentially exceeding this benchmark slightly. However, this stands in stark contrast to the pre-COVID levels.
The IMF report acknowledges that shipping costs and delivery times have now returned to pre-pandemic levels following the end of the global health emergency declared by the WHO. However, it raises concerns over persistent inflation eroding household purchasing power. Additionally, higher interest rates have led to increased borrowing costs, while the accumulated pandemic savings are gradually depleting.
The IMF’s outlook also includes a caveat regarding potential inflationary pressures arising from the escalation of the conflict in Ukraine or further commodity price surges triggered by extreme weather events.
Notably, current crude oil prices are at their highest since mid-April, indicating a renewed positive sentiment in the oil market driven by the IMF’s favorable economic projections.
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