Crude oil prices experienced an upward trend on Tuesday, driven by concerns over tight supplies and speculation surrounding the potential economic impact of reaching $100 per barrel. West Texas Intermediate (CL=F) settled at $90.39 per barrel, while Brent also closed slightly higher at $93.96 per barrel.
This steady climb in oil prices, starting in late June, is attributed to output cuts by OPEC+ and independent production reductions by Saudi Arabia, coupled with export restrictions from Russia. Refineries in the Persian Gulf are anticipated to further constrain supply by increasing their consumption of regional crude for diesel refining.
JPMorgan economists recently emphasized the potential consequences of sustained supply cuts, suggesting that Brent crude could surge to $120 per barrel. Bruce Kasman, JPMorgan’s head of economic research, warned that if this scenario unfolds in the coming weeks solely due to supply constraints, it could lead to a near-stall in the global economy next quarter.
JPMorgan economists anticipate an impact on global GDP if oil prices remain elevated. Kasman stated, “On net, we estimate the recent oil price movements, if sustained, would dampen annualized global GDP growth by 0.5%-point over two quarters.”
Despite these concerns, Kasman predicts a drop in crude prices to $86 per barrel next quarter, alleviating the potential economic impact of an oil shock.
Goldman Sachs economists, while acknowledging higher oil prices as a “manageable” headwind for the U.S. economy, slightly lowered their GDP forecast. Chief economist Jan Hatzius stated, “We estimate energy price changes will lower GDP growth by 0.3% annualized and consumption growth by 0.5% annualized over the next two quarters.”
The recent surge in oil prices has resulted in increased gasoline costs and has raised worries about slowing demand amid rising prices for goods and services. In the U.S., the pass-through effect of crude prices is evident in the significant increase in jet fuel prices, which surged more than 40% on the Gulf Coast since early July, according to JPMorgan.
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