Oil´s rise above $50 will be positive for the global economy, think-tank says

The rise in oil prices past the $50 per barrel mark was positive for the global economy all things considered, but it also made it increasingly hard to argue that deflation posed a serious threat to the US, Capital Economics said.

"The price recovery is, on balance, good news for the global economy and for equity prices," Julian Jessop, chief global economist at Capital Economics said in a research note sent to clients.

Prices in a range between $50 to $60 would be sufficient to alleviate the pressure on producers, but still low enough to provide a tailwind for spending on other goods and services, he said.

That was still true despite the fact that it was supply disruptions which had triggered the move higher in the first place.

"We are also wary of interpreting the recovery in oil prices itself as a sign of a pick-up in global activity, as it mainly reflects disruption on the supply side," he explained.

Nonetheless, it would be more of a boon for producer countries or mixed producer/consumer ones such as the US, while sapping strength from the recoveries in the euro area and Japan.

It also eliminated another reason for the Federal Reserve to delay raising interest rates a second time.

Admittedly, inflation expectations are still well anchored around 2% despite the jump in oil prices, but it is increasingly hard to argue that deflation is a serious threat to the US economy.

Jessop forecast Brent and West Texas Intermediate crude oil futures would recover further towards $60 per barrel in 2017 but cautioned there was scope for at least a temporary correction in prices over the rest of 2016, as some of the supply disruptions eased or US drilling activity picked back up.