Fitch: A very high oil price would affect economic growth in 2024

A higher-than-expected oil price next year, which would occur in a scenario where conflict in the Middle East disrupts crude oil supplies, would lead to lower economic growth and higher inflation, according to Fitch Ratings expectations, cited by hellenicshippingnews.com.

The quoted source predicts that, in such a scenario, the global GDP advance would be 0.4 percentage points lower in 2024, but only 0.1 percentage points lower in 2025, although in the absence of a significant recovery it is possibly a moderate persistent impact beyond the initial shock.

The global economic outlook released by Fitch in September assumes an average oil price of $75 per barrel in 2024 and $70 per barrel in 2025. Using simulations from the Oxford Economics global economic model, Fitch estimated the impact of possible higher oil prices of oil in the period 2024-2025 on its own reference forecasts regarding growth and inflation. The Fitch scenario assumes that, due to supply constraints, oil prices could average $120/barrel in 2024 and $100/barrel in 2025.

Brent oil averaged $82/barrel in 2023 until October 7, when Hamas attacked Israel. In this context, the price rose to 94 dollars/barrel, after which it returned to 87 dollars/barrel at the beginning of November.

Fitch analysts believe that higher oil prices would hurt GDP growth in almost all of the world's major economies, although the impact would largely moderate in 2025. But in the absence of a significant rebound in growth in 2025, we will see a lasting impact, even if generally moderate, according to the cited source.

The aggregate impact on the Fitch 20 (the top 20 major world economies), would be a global GDP growth deficit of 0.4 percentage points in 2024 and 0.1 percentage points in 2025.

Fitch also shows that higher oil prices would lead to higher-than-expected inflation rates in 2024, followed by corrections in 2025. Among developed economies, the impact would be less, with the US having an inflation rate of approximately 2 percentage points higher than the one forecast until the end of 2024.

Fitch concludes that an oil price shock driven by the Middle East conflict could be accompanied by tighter financial conditions, lower corporate and consumer confidence, and corrections in financial markets.

• The International Energy Agency is increasing its oil demand estimates

The International Energy Agency (IEA) yesterday improved its estimates regarding the growth of oil demand, both for this year and for the next year, despite an expected slowdown in activity in almost all major economies, reports Bloomberg.

"Global oil demand continues to exceed expectations", the agency announced, adding: "However, the increase in global oil supply is also exceeding expectations as production advances in the US and Brazil outpaced forecasts."

According to the IEA, global oil demand will rise by 2.4 million barrels per day this year, slightly more than the advance of 2.3 million barrels per day forecast last month, to a record annual average of 102 million barrels per day. day, notes Agerpres. China's record consumption will be responsible for about 75% of this increase, while US fuel consumption led the IEA to upgrade its forecasts.

The world oil market is expected to return to a surplus in early 2024, the IEA estimates, according to which consumption will increase by 930,000 barrels per day, compared to an advance of 880,000 barrels per day, as it estimated last month . The increase in 2024 is lower than that of 2023 thanks to the progress made in the field of energy efficiency, the advance of the electric vehicle sector and the economic slowdown. Even so, the IEA calculated that, next year, world oil consumption will reach a new record of 102.9 million barrels per day.