According to a recent poll conducted by Reuters, economists are bullish about the global economy’s continued growth. This positive outlook is likely to benefit oil prices, as demand for oil typically increases with economic growth. However, some factors may keep prices range-bound. For example, central banks may be hesitant to cut rates if global GDP growth reaches its projected target of 2.9% this year, which would keep borrowing costs high for longer.
Nathan Sheets, Citi’s global chief economist, has also expressed optimism about the global economy’s resilience this year. Major economies like the U.S., China, and Europe have all seen growth projections revised upward, leading to a sense of confidence in the global economy.
The impact of strong economic growth on oil demand is mixed. While higher growth usually leads to increased demand for oil, inflation caused by rising interest rates can dampen this demand growth. This could keep prices within a certain range unless there is an escalation in the Middle East that poses a threat to supply.
The World Bank has warned that if such an escalation occurs, oil prices could exceed $100 per barrel, contributing to persistent inflation. Indermit Gill, the World Bank’s chief economist, explained that falling commodity prices have hit a wall, meaning interest rates may remain higher than expected. He cautioned that an oil supply shock in the Middle East could undermine efforts to control inflation and put the world in a vulnerable position.
Overall, while there are some mixed signals about oil demand and pricing due to economic growth and inflation concerns, experts believe that strong economic growth will continue to support oil demand in the short term.
In conclusion, while there are mixed signals about how strong economic growth will impact oil demand and pricing in the long term due to inflation concerns and potential supply shocks in the Middle East
