Global Economy’s Resilience Could Keep Oil Prices Range-Bound, Says Reuters Poll of Economists

A recent poll conducted by Reuters among economists suggests that the global economy is expected to continue on a strong course, which is positive news for oil. However, there are some implications that could keep prices range-bound. According to the 500 respondents surveyed, global GDP growth may reach 2.9% this year, leading central banks to hesitate cutting rates and keeping borrowing costs high for longer.

Citi’s global chief economist, Nathan Sheets, has stated that the global economy has shown surprising resilience this year. Growth projections for major economies such as the U.S., China, and Europe have been revised upward, contributing to a solid feeling in the global economy.

The implications of strong economic growth on oil demand are mixed. While oil demand typically increases with economic growth, inflation due to higher benchmark rates can dampen this growth. If there is an escalation in the Middle East that threatens supply, oil prices such as Brent and WTI could exceed $100 per barrel and contribute to persistent inflation. The World Bank recently warned about this possibility and emphasized that falling commodity prices have hit a wall, meaning interest rates may remain higher than expected if there is an energy shock in the Middle East.