Global oil demand growth is expected to remain subdued, with the economy weakening and buffeted by Sino-US trade tensions, the International Energy Agency (IEA) said on Thursday.
“International trade relations have further deteriorated in the past few weeks but US and Chinese officials announced that they would resume trade negotiations in early October,” the Paris-based IEA said in its latest monthly report.
“Trade disputes and rising uncertainty about the impact of the UK’s possible exit from the European Union are reducing global growth through lower business and consumer confidence, supply chain re-assessments, declining investment and direct reduction of trade,” it added.
Against this uncertain backdrop, the IEA left its oil demand growth forecasts for this year and next year, lowered in its previous monthly report, unchanged at 1.1 million barrels per day (mbd) and 1.3 mbd.
Demand growth in the first six months of this year came in at just 0.5 mbd and touched a low of 0.2 mbd in June, it noted.
“For second half 2019, we assume no further deterioration in the economic climate and in trade disputes,” it said.
At the same time, “demand growth will be significantly higher helped by a comparison versus a low base in second half 2018, lower oil prices versus a year ago and additions to petrochemicals capacity”, it said.
This appeared to be borne out by the figures for July showing a gain of 1.3 mbd.
On the supply side, the Paris-based IEA said August global production rose 0.53 mbd to 100.7 mbd.
Increases in US, Norway and Brazil output should boost non-Opec growth from 1.9 mbd this year to 2.3 mbd next year, hitting Opec output, it said. “[This] non-Opec surge will cut the need for Opec crude to 28.3 mbd in first half 2020, 1.4 mbd below the group’s August output.”
The IEA noted that in June the US overtook Saudi Arabia to become the world’s top oil exporter.
The agency described as a “major political event” the appointment of a new Saudi energy minister, Prince Abdulaziz bin Salman,” who is a well-known and experienced figure.”
He is due to attend an Opec ministers meeting on Thursday when the cartel will review its production cut arrangement with several non-Opec states, notably Russia, which appears to have provided some support for prices.
Current benchmark Brent and West Texas Intermediate (WTI) prices at around $61 per barrel and $56 “are both about 20 per cent below year-ago levels”, the IEA said.