IEA cuts crude oil demand forecasts for 2019 and 2020

Cites geopolitical tensions and weaker global economic outlook

PARIS, Aug 10, (KUNA): Crude oil demand so far this year has been “very sluggish” due largely to geopolitical tensions and weaker global economic forecasts, prompting a downward revision of oil demand growth over the next 18 months, the International Energy Agency (IEA) said in a report Friday.

The consumer-nation Agency forecast that oil demand would now only grow by 1.1 million barrels per day (mbpd) to reach 100.4 mbpd in 2019, down an unseasonal 100,000 b/d on earlier forecasts.

The IEA also drew down its oil demand growth forecast for 2020, slicing 50,000 b/d off earlier projections. Average oil demand, nonetheless, is still expected to reach 101.7 mbpd next year, an expansion of 1.1 mbpd.

Geopolitical tensions in several parts of the world, but especially in the Arabian Gulf, have curtailed demand growth.

But reassurances on protection of tanker traffic using the Strait of Hormuz have had a stabilizing effect on prices which have eased from earlier highs, although insurance costs for transporters have risen.

The Paris-based Agency stressed the rising trade tensions, particularly between the US and China.

“There have been concerns about the health of the global economy expressed in recent editions of this Report and shown by reduced expectations for oil demand growth. Now, the situation is becoming even more uncertain: the US-China trade dispute remains unresolved and in September new tariffs are due to be imposed. Tension between the two has increased further this week, reflected in heavy falls for stock and commodity markets,” the report remarked.

The IEA said that it was basing its outlook for economic performance on reports for future global activity, including a recent report by the International Monetary Fund (IMF).

“We took into account the International Monetary Funds recent downgrading of the economic outlook: they reduced by 0.1 percentage points for both 2019 and 2020 their forecast for global GDP growth to 3.2 percent and 3.5 percent, respectively,” it said.

On the supply side oil, output held steady in July rising by 100 mbpd, but it declined compared with yearearlier levels for the first time since November 2017.

Compliance by OPEC countries plus partners in supply level restrictions was described as “robust” in the report.

Due to Saudi Arabian, Iranian and Venezuelan shortfalls in output, overall July OPEC oil production reached 29.71 mbpd, a monthly drop of 190,000 b/d, but down 2 mbpd when compared with July 2018.

Non-OPEC supply last month rose 160,000 b/d to 64.9 mbpd mainly due to boosts in the North Sea and Brazil.