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Oil prices continue steady drift away from $50

IMF chief says benefits from lower oil prices haven't surfaced as strongly as expected.

By Daniel J. Graeber
Oil prices continue steady drift away from $50
IMF Managing Director Christine Lagarde says some of the benefits of low oil prices have yet to materialize as strongly as once expected, pushing oil further away from the $50 mark. Photo by Kevin Dietsch/UPI | License Photo

NEW YORK, June 16 (UPI) -- Crude oil prices extended their losses in early Thursday trading after the International Monetary Fund warned global economic growth was lopsided.

Oil prices moved sharply lower late in the Wednesday session after U.S. Federal Reserve Chair Janet Yellen said growth could not yet sustain an increase in key interest rates.

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"Inflation has continued to run below the committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports," the Fed's policy statement read.

Lower crude oil prices had acted as a de facto stimulus for some consumers, though rising fuel prices and lackluster wage growth are creating headwinds. The U.S. Labor Department, meanwhile, reported first-time claims for unemployment increased 13,000 for the week ending June 11 for a seasonally-adjusted 277,000.

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Speaking from Norway, IMF Managing Director Christine Lagarde said the overall economic benefits from the decline in crude oil prices hadn't materialized as strongly as expected.

"That oil windfall turned out to be more like a breeze," she said.

Crude oil prices retreated further away from the $50 range in early Thursday trading, after passing that psychological threshold earlier in June for the first time in nearly a year. The price for Brent crude oil was 1.6 percent lower than the previous close to start the day at $48.17 per barrel. West Texas Intermediate, the U.S. benchmark for oil, lost 1.7 percent to open at $47.21 per barrel.

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Median projections for the U.S. economy from the Federal Reserve show little to no growth over the next two years. This follows a report from the Organization of Petroleum Exporting Countries that said the balance between supply and demand for energy products has not changed from month to month.

LaGarde said lower oil prices haven't yet offset the drag from other factors like low wage growth, weak employment and the broadening gap between the rich and the poor. For national economies, the situation is relatively similar, with some booming and some moving toward a bust.

"If continued, this trend would lead to a further widening of stock imbalances, or growing disparities between creditor and debtor countries, which could raise global risks," she said.

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On the whole, investors are anxious ahead of next week's vote on British membership in the European Union. If it leaves, most analysts said the regional economy will suffer.

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