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Oil Up as Middle East Tensions Persist

(FILES) A picture taken on May 23, 2016 shows the ExxonMobil refinery in Notre-Dame-de-Gravenchon, northwestern France, on March 11, 2024. (Photo by CHARLY TRIBALLEAU / AFP)
(FILES) A picture taken on May 23, 2016 shows the ExxonMobil refinery in Notre-Dame-de-Gravenchon, northwestern France, on March 11, 2024. (Photo by CHARLY TRIBALLEAU / AFP)
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Oil Up as Middle East Tensions Persist

(FILES) A picture taken on May 23, 2016 shows the ExxonMobil refinery in Notre-Dame-de-Gravenchon, northwestern France, on March 11, 2024. (Photo by CHARLY TRIBALLEAU / AFP)
(FILES) A picture taken on May 23, 2016 shows the ExxonMobil refinery in Notre-Dame-de-Gravenchon, northwestern France, on March 11, 2024. (Photo by CHARLY TRIBALLEAU / AFP)

Oil prices rose in Tuesday trade as geopolitical tensions in the Middle East continued to spur concern, but gains were limited on bearish demand sentiments and as the market waited for monthly reports from oil agencies.
Brent futures for May delivery was up 26 cents, or 0.3%, to $82.47 a barrel by 0408 GMT. The US crude April contract rose 17 cents, or 0.2%, to $78.10 a barrel, Reuters reported.
While the war between Israel and Palestinian group Hamas has not led to significant oil supply disruptions, Yemen's Iran-aligned Houthis have been attacking ships in the Red Sea and Gulf of Aden since November in what they say is a campaign of solidarity with Palestinians.
Airstrikes attributed to a US-British coalition hit port cities and small towns in western Yemen on Monday, while the Houthis said on Tuesday they had targeted what was described as the "US ship Pinocchio" in the Red Sea with missiles.
Capping gains however are the outlooks for weaker demand and increasing supply from producers outside of the Organization of Petroleum Exporting Countries (OPEC).
The International Energy Agency (IEA) expects oil supply to grow to a record high of about 103.8 million bpd, almost entirely driven by producers outside OPEC and its allies (OPEC+), including the United States, Brazil and Guyana.
Meanwhile, China's crude oil imports rose in the first two months of the year versus the same period in 2023, but they were weaker than the preceding months, continuing a trend of softening purchases by the world's biggest buyer.
In the meantime, the market is awaiting demand estimates from monthly reports by OPEC, the IEA and the Energy Information Administration, analysts from ANZ said in a note.
"While we believe the estimates will be largely unchanged, any upside surprise will ease demand concerns."

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IMF Sees Steady Global Growth

FILED - 24 October 2024, US, Washington: The logo of the International Monetary Fund (IMF) is seen on the facade of the conference building on Pennsylvania Street. Photo: Soeren Stache/dpa
FILED - 24 October 2024, US, Washington: The logo of the International Monetary Fund (IMF) is seen on the facade of the conference building on Pennsylvania Street. Photo: Soeren Stache/dpa
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IMF Sees Steady Global Growth

FILED - 24 October 2024, US, Washington: The logo of the International Monetary Fund (IMF) is seen on the facade of the conference building on Pennsylvania Street. Photo: Soeren Stache/dpa
FILED - 24 October 2024, US, Washington: The logo of the International Monetary Fund (IMF) is seen on the facade of the conference building on Pennsylvania Street. Photo: Soeren Stache/dpa

The International Monetary Fund expects the world economy to grow a little faster and inflation to keep falling this year. But it warned that the outlook is clouded by President-elect Donald Trump’s promises to slash US taxes, impose tariffs on foreign goods, ease regulations on businesses and deport millions of immigrants working illegally in the United States.

The Washington-based lending agency expects the world economy to grow 3.3% this year and next, up from 3.2% in 2024. The growth is steady but unimpressive: From 2000 to 2019, the world economy grew faster – an average of 3.7% a year. The sluggish growth reflects the lingering effects of big global shocks, including the COVID-19 pandemic and Russia's invasion of Ukraine.

The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty.

Global inflation, which had surged after the COVID-19 pandemic disrupted global supply chains and caused shortages and higher prices, is forecast to fall from 5.7% in 2024 to 4.2% this year and 3.5% in 2026.

But in a blog post that accompanied the release of the IMF’s latest World Economic Outlook report, the fund’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term,” The Associated Press reported.

Big tax cuts could overheat the US economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.

Gourinchas also wrote that Trump’s plans to slash regulations on business could “boost potential growth in the medium term if they remove red tape and stimulate innovation.’’ But he warned that “excessive deregulation could also weaken financial safeguards and increase financial vulnerabilities, putting the US economy on a dangerous boom-bust path.’’

Trump inherits a strong US economy. The IMF expects US growth to come in at 2.7% this year, a hefty half percentage point upgrade from the 2.2% it had forecast in October.

The American economy — the world's biggest — is proving resilient in the face of high interest rates, engineered by the Federal Reserve to fight inflation. The US is benefiting from a strong job market that gives consumers the confidence and financial wherewithal to keep spending, from strong gains in productivity and from an influx of immigrants that has eased labor shortages.

The US economy’s unexpectedly strong performance stands in sharp contrast to the advanced economies across the Atlantic Ocean. The IMF expects the 20 countries that share the euro currency to collectively grow just 1% this year, up from 0.8% in 2024 but down from the 1.2% it was expecting in October. “Headwinds,” Gourinchas wrote, “include weak momentum, especially in manufacturing, low consumer confidence, and the persistence of a negative energy price shock’’ caused by Russia’s invasion of Ukraine.

The Chinese economy, No. 2 in the world, is forecast to decelerate – from 4.8% last year to 4.6% in 2025 and 4.5% in 2026. A collapse in the Chinese housing market has undermined consumer confidence. If government doesn’t do enough to stimulate the economy with lower interest rates, stepped-up spending or tax cuts, China “is at risk of a debt-deflation stagnation trap,’’ Gourinchas warned, in which falling prices discourage consumers from spending (because they have an incentive to wait to get still better bargains) and make it more expensive for borrowers to repay loans.

The IMF forecasts came out a day after its sister agency, the World Bank, predicted global growth of 2.7% in 2025 and 2026, same as last year and 2023.

The bank, which makes loans and grants to poor countries, warned that the growth wasn’t sufficient to reduce poverty in low-income countries. The IMF’s global growth estimates tend to be higher than the World Bank’s because they give more weight to faster-growing developing countries.