JP Morgan flagged a big risk for the global economy, saying the concern is that cuts to the supply of oil "are not finished".
JPM say this could see the oil price as high as US$120 / bbl.
And that the flow-on effect if this were to happen in the next few weeks would be "the global economy would slow to a near stall" in Q4 of 2023.
JPM have a forecast for the price of oil to fall back to $86 in Q4. The impact of the oil price shock will fade quickly if this is the case says JPM:
- In this scenario, we are not concerned about the pass-through of oil prices into core inflation.
- A bigger concern would be if central banks see themselves less able to look through any oil price shock than they have done in the past.
