OPEC Lends a Helping Hand to Central Bankers

OPEC lended a helping hand to the world’s central bankers.

Since European Central Bank delivered less monetary stimulus than what investors expected and the Federal Reserve is about to tighten next week, the global economy may find support from the weakest oil price in over six years.

West Texas Intermediate is trading at about $40 a barrel four days after the Organization of Petroleum Exporting Countries chose not to limit output, extending the commodity’s decline from its June 2014 peak of $107.73 and this year’s high of $62.58 in May.

While its earlier slide failed to provide the economic pickup some anticipated, economists at UniCredit Group AG, Commerzbank AG and Societe Generale SA are still banking on cheaper fuel to spur spending by consumers and companies in 2016.

“On net, central bankers should take this as a positive,” said Peter Dixon, an economist at Commerzbank in London. “This does help to stimulate demand by leaving a little bit of money in the pocket and providing a feel-good factor.”

At Societe Generale, Michala Marcussen, global head of economics, reckons every $10 drop in the price of oil lifts global growth by 0.1 percentage point. She estimates that since 2014, the world has enjoyed a windfall equivalent to 2 percent of gross domestic product it would otherwise have spent on crude.

“Ourbiggest relief last week was that OPEC decided no output cut, promising consumers inexpensive oil for longer,” said Marcussen.