Oil rises and the United Nations lowers the economic growth outlook for 2022 2022-05-19T18:57:59 Oil rises and the United Nations lowers the economic growth outlook for 2022: The United Nations lowered its global economic growth outlook this year to 3.1% from 4% in January, mainly due to events in Ukraine. Evest follows market developments in the following report. The United Nations lowers the economic growth outlook to 3.1 Global inflation is expected to reach 6.7% this year, more than double the 2010-2020 average of 2.9%. Global GDP growth is expected to be 3.1% in 2023 compared with the previously projected 3.5%. According to a report prepared by the United Nations Department of Economic and Social Affairs, “the global economy, which has not had time to fully recover from the pandemic-related downturn, may be approaching a new crisis in 2022.” The military conflict in Ukraine has “effectively ended” the post-pandemic recovery that began in 2021. In addition to Europe’s major humanitarian crisis, events in Ukraine have led to further increases in food and commodity prices and compounded inflationary pressures around the world. “The geopolitical uncertainty caused by the conflict has adversely affected business confidence and investment in the manufacturing sector, exacerbating short-term economic prospects,” said Gregor Agabekian, an economist at the ministry. “Of course, the conflict in Ukraine was not the only factor that led to the revision of previous expectations.” According to the UN predictions, China’s economy will rise by 4.5% in 2022, not by 5.2% as previously predicted. US GDP will be up 2.6% this year and 1.8% next year. The underlying outlook is due to high risks associated with a further escalation of the conflict in Ukraine, the potential for a new COVID-19 pandemic and the faster-than-expected tightening of the world’s monetary policy, due to high inflation. “In a statistical sense, reducing the global growth outlook in our report has many components, but primarily due to the more modest outlook for the world’s leading economies – the United States and China,” Agapikian said. 2.6% in 2022, due to high inflationary pressures – the country is facing a completely unprecedented inflation level in recent decades, more specifically in four decades, which has had a negative impact on private consumption.” Other factors include the Federal Reserve’s strong monetary tightening and the strengthening of the US dollar, which has adversely affected foreign trade. The EU’s growth forecast has also been revised downwards to 2.7% from 3.9%. The sharp rise in energy prices is a serious negative shock to the region. The report says the sudden disruption of oil and natural gas supplies from Russia will likely lead to a recession in many EU countries. In 2020, the EU imported 57.5% of total energy consumed, while imports from the Russian Federation accounted for nearly 25%. Inflation across the EU accelerated sharply in 2021-2022, reaching multi-decade highs in many countries. Hence, the rapid rise in spending has reduced household budgets and affected private consumption, as well as urged firms to reduce or delay investment. “We expect a contraction in the Russian Federation’s economy of approximately 10% in 2022 due to unprecedented trade and financial sanctions that have come into force since February 2022,” Agapikian said. Ukraine’s economy is expected to contract by 30-50% in 2022, with massive infrastructure destruction, population displacement and a halt to economic activity. Overall, GDP growth estimates for emerging market countries worsened this year, reaching 4.1% from 4.5%. Oil rises to $110 Oil prices rose on Thursday, correcting after falling at the end of the previous session. Growing fears of a possible recession in the United States as a result of the Fed’s swift tightening of monetary policy sent the stock market crashing on Wednesday, sending the oil market slumping, despite data on a reduction in US inventories. According to experts: “Inventory data works in favour of higher oil prices, but this does not matter in a recession concern.” The price of July Brent oil futures on the London Stock Exchange Futures was $110.69 per barrel on Thursday, $1.58 (1.45%) higher than the closing price of the previous session. As a result of Wednesday’s trading, these futures declined by $2.82 (2.5%) to $109.11 per barrel. The price of West Texas Intermediate oil futures for June in electronic trading on the New York Mercantile Exchange (NYMEX) was $110.55 per barrel by this time, $0.96 (0.88%) higher than the final value of the previous session. On Wednesday, these futures fell by $2.81 (2.5%) to $109.59 per barrel. On Wednesday, the US Department of Energy said that US commercial oil inventories fell 3.39 million barrels last week to 420.82 million barrels, 14 percent below the five-year average. Experts surveyed by Bloomberg predicted an increase of 2 million barrels in oil inventories. The Department of Energy said that inventories at the terminal in Cushing, Oklahoma, where oil traded is being stored on the NYMEX, fell by 2.4 million barrels to 25.8 million barrels. Oil production in the United States increased by 100 thousand barrels compared to the previous week – reaching 11.9 million barrels per day. Gasoline commodity inventories decreased by 4.78 million barrels and distillates increased by 1.24 million barrels. Analysts expected a decline of 1.4 million barrels and 600 thousand barrels, respectively. Experts note that the market is highly volatile and, in the meantime, investors have sufficient reasons to sell. Among the factors that may contribute to the decline of the oil market are, in particular, signs of a possible easing of US sanctions against Venezuela. The Associated Press reported, citing Washington sources, that oil and gas giant Chevron Corp. was given an opportunity to begin negotiations with Venezuela’s PDVSA to renew the license. However, it still does not have the necessary resources to extract or export oil from the country.