The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, citing a sharp slowdown in China , weak commodity prices and rising interest rates in the U.S.
The IMF now predicts that the global economy will grow 3.4% in 2016 and 3.6% in 2017, compared with previous estimates of 3.6% and 3.8% respectively.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Oversupply issue will be exacerbated further as Iran plans to return to the global oil market after western-imposed sanctions were lifted earlier this month. Analysts say the country could quickly ramp up exports by around 500,000 barrels, fueling fears over increased supplies amid a global supply glut and slowing demand.
Crude oil for delivery in March on the New York Mercantile Exchange tumbled to a session low of $28.56 a barrel, a level not seen since September 2003, before recovering to trade at $28.66 by 08:00GMT, or 3:00AM ET, down 91 cents, or 3.09%.
A day earlier, Nymex prices dropped 82 cents, or 2.7%. New York-traded oil futures are down nearly 23% since 2016 began.
Market players looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles rose by 3.0 million barrels in the week ended January 15.
The reports come out one day later than usual due to Monday’s public holiday in the U.S.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for March delivery fell 67 cents, or 2.32%, to trade at $28.15 a barrel. London-traded Brent prices sank to $27.67 on Monday, the lowest since October 2003.
Brent prices are down almost 25% since the start of the year, as lingering concerns over China’s economic outlook added to the view that a global supply glut may stick around for much longer than anticipated.
Meanwhile, Brent's discount to the West Texas Intermediate crude contract stood at 51 cents, compared to a gap of 81 cents by close of trade Tuesday.
U.S. crude has been firmer relative to Brent lately, on signs that the U.S. oil market is likely to grow tighter following Congress' decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russia.Last modified on Tuesday, 02 February 2016