IEA cuts oil demand forecasts for 2018-19

The International Energy Agency (IEA) cut forecasts for oil demand this year and next due to growing threats to global economic growth, yet warned that dwindling spare oil supplies will keep prices high.

Reduced growth estimates from the International Monetary Fund (IMF), trade disputes and the strain of high oil prices all fed into the downgrade to consumption, the Paris-based IEA said in its monthly report. Yet, as supply losses deepen in Opec members Venezuela and Iran, spare production capacity levels elsewhere amount to just two per cent of global demand and is likely to shrink further, it said.

“Expensive energy is back” and “it poses a threat to economic growth,” said the IEA. “For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute.”

Oil climbed to a fouryear high above $85 (Dh312) a barrel in London last week on concerns that looming US sanctions on Iranian crude exports will leave markets short of supply later this year. Prices have since retreated, as attention switches to the demand threats posed by faltering emerging economies and the US-China trade dispute.

IEA cut its estimate for global oil-demand growth for 2018 and 2019 by about 110,000 barrels a day, to 1.3 and 1.4 million barrels a day respectively. Both global demand and supply are close to hitting 100 million barrels a day for the first time.

Fatih Birol, IEA’s executive director, said in an interview last week that prices are “entering the red zone” that signals danger to consumption.