Oil Mixed After IMF Trims Forecast

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed at the top of the hour after the International Monetary Fund cut its growth forecast and warned of global stagnation, eroding optimism that had pushed oil futures to three-week highs overnight.

The oil futures complex had rallied on the back of a weakening U.S. dollar and hope a meeting of 15 leading oil producers would take coordinated action this weekend in the face of an oversupplied global market and agree to freeze production at their January output levels.

At 9:00 AM ET, NYMEX May West Texas Intermediate crude futures were up 18cts at $40.54 bbl, and have since traded at a three-week high of $40.96. June Brent crude futures on the IntercontinentalExchange advanced 68cts to $43.12 bbl, and have since traded at a $43.64 four-month high on the spot continuation chart.

In products trade, NYMEX May ULSD futures rose 1.22cts to $1.2295 gallon, and since rallied to a $1.2486 three-week spot high. May RBOB futures eased 0.31cts to $1.5031 gallon at 9:00 AM ET after trading near a seven-month spot high of $1.5183 overnight, with the contract again moving higher.

IMF's report issued this morning cut its global economic growth forecast for 2016 to 3.2% from prior estimate of 3.4% while trimming the 2017 outlook to 3.5% from prior estimate of 3.6%. IMF cut the 2016 growth forecast for the United States to 2.4% from prior estimate of 2.6%.

Slowing economic growth dampens demand for oil.

The Organization of the Petroleum Exporting Countries and non-OPEC producers are set to meet on Sunday (4/17) in Doha to discuss an initiative designed last month by Russia and Saudi Arabia to freeze oil production at January levels. Some critics of the plan remain unconvinced the proposal if agreed to would whittle down the persistent supply glut that has sharply lowered oil prices for the past two years, noting that a freeze is not a cut. They also note production by the Saudis, Iraq and Russia were at or near record high output rates in January.

The premium held by ICE Brent crude oil futures over WTI futures again widened, with the spread between the nearest delivered contracts for Brent and WTI at its widest at roughly $2.70 bbl in a month, boosted by a OPEC supply freeze and oilfield maintenance in the North Sea.

There's a growing sense by speculators, analysts and industry executives that oil prices have already bottomed out, and the market is now beginning a period of price recovery. An increasing risk-appetite has extended to the equities market, as the U.S. dollar fell to a 7-1/2-month low versus its peer currencies overnight, but has since turned higher. Hedge funds are reportedly exiting long positions on the dollar.

Analysts have mixed views on this week's oil data from the American Petroleum Institute and Energy Information Administration. Expectations range from a 3.0 million bbl build to a 3.0 million bbl decline in domestic crude oil supply. The American Petroleum Institute is scheduled to release its data at 4:30 PM ET and the EIA at 10:30 AM ET Wednesday.

George Orwel can be reached at george.orwel@dtn.com