Oil slides after IMF warns of tougher 2023

Oil prices slid on Tuesday from their highest levels in a month on a stronger US$ and after the head of the International Monetary Fund warned of a tougher 2023 as major economies experience weakening activity.

Brent crude futures dropped to US$84.93/barrel by 0148 GMT while US West Texas Intermediate crude (WTI) traded at US$79.49/barrel, after the US$ strengthened. A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.

IMF Managing Director Kristalina Georgieva said on Sunday that the United States, Europe and China - the main engines of global growth - are all slowing down simultaneously, making 2023 tougher than 2022 for the global economy.

Still, oil prices settled more than 2% higher on Friday with Brent and WTI closing 2022 up 10.5% and 6.7%, respectively.

Commodities saw a substantial US$12.3 billion bullish flow in the week that ended on December 27, 2022 the single largest weekly bullish flow in 2022, Societe Generale analysts said in a January 03. 2023 note.

“The commodity with the largest flow was Brent, which saw a US$3.4 billion bullish flow as Russia outlined its response to the EU and G7 imposed price cap on the country's crude exports to third parties," the analysts said.

President Vladimir Putin banned the supply of crude and oil products from February 01, 2023 for five months to nations that abide by the cap in a decree, which also included a clause that allows for Putin to overrule the ban in special cases.

Russian crude has been diverted to India and China from Europe while Moscow planned to increase diesel exports from the Baltic Sea port of Primorsk to 1.81 million tons in January 2023. However, January oil products exports from Tuapse are expected to fall to 1.333 million tons, traders said.

A Reuters oil price poll showed that Brent prices are expected to average at US$89.37/barrel in 2023 while the average for WTI is at US$84.84 a barrel as global economic growth slows.

In China, the world's largest crude importer and second-largest oil consumer, some people in key cities braved the cold and a rise in COVID-19 infections to return to regular activity on Monday, raising the prospect of a boost to the economy and oil demand as more recover from infection.