Brent oil trading at $123, prices hit on IMF economic worries

12 April 2011 12 April 2011

BonTrade

Brent oil futures open Tuesday’s trading session back near $123 a barrel after the IMF revised downwards their forecasts for 2011 economic growth in the US and Japan, two of the world’s largest economies, and Eurozone forecasts also suffered.

Latest Brent Oil Price

In London, Brent crude oil futures for May 2011 delivery was trading at $123.07, 07.50 GMT this morning on the ICE Futures Exchange after falling nearly three percent on Monday.

IMF on Commodity (oil) Prices

“Fears have turned to commodity prices. Commodity prices have increased more than expected, reflecting a combination of strong demand growth and a number of supply shocks. These increases conjure the specter of 1970’s style stagflation, but they appear unlikely to derail the recovery.” said Olivier Blanchard, Chief Economist at the IMF.

However, the IMF stated that the global economic recovery is still gaining strength, with world growth projected at about 4.5 percent in both 2011 and 2012, but unemployment with remaining high, and risks of overheating are building in emerging market economies.

IMF – World Economic Outlook

US Forecast: The IMF’s World Economic Outlook (WEO) said this is particularly urgent in the US to stem the risk of globally destabilizing changes in bond markets. “To make a sizable dent in the projected medium term deficits, broader measures such as social security and tax reforms will be essential.”

Japan Forecast: The report said that in Japan, the immediate budgetary priority was to support reconstruction. Once reconstruction efforts are under way and the size of the damage is better understood, attention should turn to linking reconstruction spending to a clear fiscal strategy for bringing down the public debt ratio over the medium term.

Eurozone forecast: In the eurozone, greater trust needs to be re-established in eurozone banks through ambitious stress tests and restructuring and recapitalisation programs. The IMF also warned the European Central Bank to hold off on interest rate hikes to give the euro area banking system time to repair itself.