Live Markets: Goldman: Commodity prices, while high, won't derail the global economy

The Brink's

24/04/2024 18:03

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    GOLDMAN: COMMODITY PRICES, WHILE HIGH, WON'T DERAIL THE
GLOBAL ECONOMY
        
  
    Amid escalating geopolitical tensions in the Middle East and
a demand recovery, commodity prices have risen since the start
of 2024, raising questions around whether they could prompt a
pickup in inflation and result in more hawkish central bank
monetary policy.
    Brent oil prices have risen ~14% year-to-date to trade
around $88 on concerns of a broadening conflict in the Middle
East, although so far they remain below the $120 barrier reached
two years ago after the outbreak of the war in Ukraine. 
     And according to a research noted from Goldman Sachs
strategists, the upside risk to global inflation from higher oil
prices is fairly limited. The strategists say current prices
include a geopolitical risk premium of $5-10 and that global
spare production capacity remains fairly elevated. 
    These strategists are estimating a $90 per barrel ceiling on
Brent barring further geopolitical risks to supply, providing
some "insurance" against further oil price spikes.
    GS also believes that the pass-through from oil and other
commodity shocks is "likely to be much lower now that the
economy has cooled and inflation has returned to near-normal
level".
    Higher crude prices would not even imply a remarkable
slowdown in growth, the broker said.
    "The recent increase in oil prices implies a 0.1 points drag
on global GDP in 2024, while the GDP hit would rise to a still
moderate 0.3 points in the upside scenario where oil prices rise
to $100 per barrel", it added.
    The global economy is forecast to expand 2.6% in 2024,
according to GS' economists.
    
    (Matteo Allievi)
     *****
    
    
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