IEA cuts oil demand forecast over global economy worries
The outlook for oil demand growth in 2019 has dimmed due to worsening prospects for world trade, the International Energy Agency (IEA) said on June 14, although stimulus packages and developing countries should boost growth going into 2020.
The Paris-based IEA, which coordinates the energy policies of industrial nations, revised down its 2019 demand growth estimate by 100,000 barrels to 1.2 million barrels per day (bpd), but said it would climb to 1.4 million bpd for 2020.
“The worsening trade outlook (is) a common theme across all regions”, it added.
The IEA also attributed lackluster demand growth in the first half of the year to a slowdown in the petrochemicals industry in Europe, warmer than average weather in the northern hemisphere and stalled U.S. gasoline and diesel demand.
Demand growth was likely to pick up to 1.6 million bpd in the second half of the year on government measures to mitigate the economic slowdown and robust consumption in the non-developed world.
“Stimulus packages are likely to support growth in the short term. In addition, the major central banks have stopped or slowed interest rate increases, which should support growth in 2H19 and 2020,” the IEA wrote.
U.S. sanctions on Iran and Venezuela, an output cut pact by the Organization of the Petroleum Exporting Countries (OPEC) plus its allies, fighting in Libya and attacks on tankers in the Gulf of Oman added only limited uncertainty to supply, the IEA said.
Surging U.S. supply as well as gains from Brazil, Canada and Norway would contribute to an increase in non-OPEC supply of 1.9 million bpd this year and 2.3 million bpd in 2020.
The producer group and its allies meet in the coming weeks to decide whether to maintain supply curbs. Some members are worried about a steep slide in prices, despite demands from U.S.
President Donald Trump for action to lower the cost of oil.
OPEC, Russia and other producers have since Jan. 1 implemented a deal to cut output by 1.2 million bpd. The alliance, known as OPEC+, is due to meet on June 25-26 or in early July to decide whether to extend the pact.
Despite the supply cut, oil has tumbled to $62 a barrel from April’s 2019 peak above $75, pressured by concern over the U.S.-China trade dispute and an economic slowdown.