Oil falls a second day as IMF reduces global economy forecast

Oil declined for a second day as the International Monetary Fund cut its global-growth outlook by the most in three years. Futures slipped as much as 1.3 percent in London after falling by the most in a week yesterday. The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the Washington-based IMF said in its quarterly global outlook yesterday. China's gross domestic product expanded by 7.4 percent in 2014, the slowest rate since 1990, official data showed.

Oil slid more than 50 percent since June as the U.S. pumped at the fastest pace in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to cut output. The IMF's downgrade, following reduced growth expectations published by the World Bank on Jan. 13, undermines speculation that lower oil prices would spur economic activity.

"The IMF revision is part of the general growth downgrade we are currently seeing," Ole Sloth Hansen, an analyst at Saxo Bank A/S, said by e-mail from Copenhagen. "It does indicate that we are going to struggle getting out of the supply glut from increased demand. That leaves the focus squarely on what happens to supply."

Brent for March settlement fell as much as 63 cents to $48.21 a barrel on the London-based ICE Futures Europe exchange, and traded at $48.35 at 9:12 a.m. local time. The contract declined $1.33 to $48.84 yesterday. Total volume was about 47 percent above the 100-day average for the time of day. The European benchmark crude traded at a premium of 80 cents to West Texas Intermediate, the U.S. marker grade.

WTI for February delivery, which expires today, decreased $1.53 to $47.16 a barrel in electronic trading on the New York Mercantile Exchange, compared with the close of Jan. 16. Floor trading was suspended yesterday for the Martin Luther King Jr. holiday and transactions will be booked with today's for settlement purposes. The more active March future was down $1.59 at $47.54.

The reduction in the IMF growth forecast was the biggest since January 2012, when it lowered its estimate for expansion that year to 3.3 percent from 4 percent amid forecasts of a recession in Europe.

The fund cut 2015 estimates for the euro area, Japan, China and Latin America. The deepest reductions were in places suffering from crises, such as Russia, or for oil exporters including Saudi Arabia. The U.S. was the exception, with an upgrade to the forecast for the world's largest economy to 3.6 percent growth in 2015, up from 3.1 percent in October. GDP (CNGDPYOY) in China, the world's second-biggest oil consumer, rose by 7.3 percent in the three months ended December compared with a year earlier, the National Bureau of Statistics reported in Beijing. That surpassed a median estimate of 7.2 percent in a Bloomberg News survey of 50 economists. The Asian nation will account for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., projections from the Paris-based International Energy Agency show.