Oil prices plunged by more than 3 percent on Tuesday morning as rekindled fears of global economic growth slowdown put an abrupt pause to the oil price rally in recent days.
At 11:20 EST on Tuesday, WTI Crude was plunging 3.5 percent at $52.15, while Brent Crudewas plummeting 3.12 percent at $60.78.
On Monday, oil prices were slightly up, still running on the Friday news of the drop in the U.S. oil rig count, although signs of a slowing Chinese economic growth capped gains. China’s economic growth data showed on Monday that its gross domestic product (GDP) grew by 6.6 percent in 2018, the slowest growth pace in almost three decades, since 1990.
“Slowing manufacturing activity in China is likely weighing on demand,” Singapore-based tanker brokerage Eastport told Reuters on Tuesday.
Slowdowns in industry emerge as the first indicators of a potential lower demand for oil and oil products, according to Eastport.
But then the weak Chinese data spread to South Korea on Tuesday. Data from South Korea showed that growth in its export-oriented economy slowed to 2.7 percent in 2018, which met estimates of the central bank, but was the slowest growth pace in six years.
Even before concerns that a slowdown is spreading out of China, the International Monetary Fund (IMF) cut on Monday its forecasts for the global economic growth to 3.5 percent in 2019 and 3.6 percent in 2020, 0.2 and 0.1 percentage point below last October’s estimates and another downward revision after the lowered estimates in the October World Economic Outlook.
“Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook,” the IMF said.
The IMF doesn’t expect a recession, but “the risk of a sharper decline in global growth has certainly increased,” IMF Managing Director Christine Lagarde said on Monday.
By Tsvetana Paraskova for Oilprice.com