Baku, Azerbaijan, Dec.11
By Aygun Badalova -Trend:
The prospects for the world economy are much brighter with global oil prices at $70 per barrel than they were in June when Brent was at $110 per barrel, analysts of British economic research and consulting company Capital Economics believe.
Roughly speaking, the $40 fall of the oil price represents a transfer of annual income of around $1,300 billion from oil producers to oil consumers, equivalent to 1.7 percent of global GDP, according to the company's analyst Julian Jessop.
"Of course, oil producers are spenders too, so the net effect on world demand will be much smaller. But on plausible assumptions about the relative propensities to spend, global GDP could easily be between 0.5 percent and 1.0 percent higher as a result of the decline in oil prices," he said.
The prices of both Brent and WTI fell sharply in November. By far the most important event in the oil market last month was the announcement that OPEC would maintain its production target at 30 million barrels per day, Capital Economics' report said.
"Despite this outcome being widely expected, the announcement still caused oil prices to fall sharply at the end of the month. Earlier in the month, the news that negotiations between Iran and the US would continue for another seven months gave support to prices as it postpones the return of Iranian oil exports," the report said.
The analysts of the British company lowered their end-2015 forecast for Brent to $65 and their end-2016 forecast to $60 per barrel.
At the same time analysts acknowledge the risk that an extended period of lower oil prices can lead to large cuts in output in both the US and Canada instead, eventually causing prices to rebound towards $100 per barrel.
During Wednesday's electronic trading on the New York Mercantile Exchange the West Texas Intermediate (WTI) for January delivery decreased by $2.88 to $77.56 a barrel.
January Brent, which is the benchmark price for products in Europe and Asia, decreased by $2.6 to $64.24 a barrel on the London-based ICE Futures Europe exchange.
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Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter: @AygunBadalova