Crude oil prices approach the $100 per barrel mark due to worries about inflation.

This Thursday, oil prices are nearing the 

$100 per barrel threshold, and many experts predict they will surpass it within the year. The rising cost of oil has played a substantial role in U.S. inflation, directly impacting gasoline prices, thereby raising consumer costs. In August, over half of the 0.6% increase in consumer prices was attributed to gasoline, which now averages around $3.87 per gallon, approximately 20 cents higher than last year, according to AAA.

These increasing oil prices have also affected diesel expenses, impacting the prices of various goods due to their influence on shipping costs. This surge in oil prices has the potential to further boost inflation rates, prompting the Federal Reserve to continue raising interest rates through 2024. Nevertheless, some experts anticipate that the inflationary impact of oil will start to wane toward the end of the year as supply aligns more closely with demand.

Despite these developments, Natasha Kaneva, who leads the global commodities strategy team at J.P. Morgan, suggests that the recent surge in oil prices might be approaching its peak. After reaching a September target of $90 per barrel, she envisions further increases being constrained since major market drivers have been largely exhausted for the time being. Kaneva's projection is that oil prices will conclude the year at approximately $86 per barrel.

Factors such as the summer travel rush and China's recovery from COVID-19 restrictions have significantly driven up oil prices. However, recent data indicates a slowdown, or even a reversal, in these trends, with high gas prices causing some consumers to reduce their driving. Kaneva observes that while there was strong demand at the beginning of the summer in the U.S., it tapered off in July and August and has remained relatively weak in September.

China's demand growth also appears to be decelerating. Kaneva anticipates a 1 million barrel per day increase in Chinese demand in the last quarter of the year compared to the previous year, but she expects it to be consistent with third-quarter 2023 volumes.

Alastair Syme, an analyst at Citi, does not anticipate that oil prices will have a significant impact on global inflation in the coming year. He points to data suggesting a potential oversupply in the oil market by 2024, given the need for ongoing OPEC+ production cuts to balance increasing non-OPEC supply against sluggish demand. However, he expresses concerns about the influence of natural gas prices on global inflation next year, particularly regarding the approximately 4% reduction in global gas supply resulting from Russia's cessation of sales to Europe.