According to a recent poll among economists conducted by Reuters, the global economy is expected to continue on a strong course. This is good news for oil as it is likely to see an increase in demand. However, some factors may keep prices range-bound. The poll of 500 respondents revealed that global GDP growth could reach 2.9% this year, which would lead central banks to be hesitant to cut rates and keep borrowing costs high for longer.
Nathan Sheets, the global chief economist at Citibank, has stated that the global economy has shown surprising resilience this year despite challenges such as trade tensions and uncertainty about Brexit. Growth projections have been revised upward for major economies such as the U.S., China, and Europe, leading to a positive outlook for the world economy.
The implications of strong economic growth on oil demand are mixed. On one hand, higher economic growth typically leads to increased oil demand. On the other hand, elevated inflation due to higher benchmark rates can dampen this demand growth. This could keep oil prices within a certain range unless there is an escalation in the Middle East that poses a threat to supply. Brent and WTI prices may remain stable due to these factors.
Inflation has become a major concern in many countries around the world, with falling commodity prices hitting a wall and interest rates remaining higher than expected. Indermit Gill, the chief economist at the World Bank, has warned that an energy shock in the Middle East could undo progress made in reducing inflation over the past two years and contribute to persistent inflation. The world is currently in a vulnerable position and an energy shock could undermine efforts to control inflation.
Overall, while there are some concerns about inflation and geopolitical risks in the Middle East, experts believe that the global economy will continue on its strong course and support oil demand.