Concerns over the health of the global economy, marked by the US-China trade dispute, forced the International Energy Agency on Friday to lower its growth forecast for oil demand for 2019 and 2020.
“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,” the Paris-based agency said in its monthly report, agency reports.
“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. Oil prices have been caught up in the retreat.”
It also noted the International Monetary Fund’s recent downgrading of its economic outlook.
The IEA thus revised downwards its estimates for growth in global oil demand for this year by 0.1 million barrels per day to 1.1 mbd.
For 2020, growth was also predicted to be slightly down, by 50,000 barrels per day to 1.3 mbd.
It warned “the outlook is fragile with a greater likelihood of a downward revision than an upward one”, and noted growth was already “sluggish” in the first half of the year.
However, it noted that the market balance has been tightened slightly in the short-term by a reduction in supply from OPEC countries.
The IEA also said it was closely monitoring oil security in the Gulf, where OPEC member Iran last week seized the third foreign tanker in less than a month as part of a bitter dispute with the United States.
It said that geopolitical tensions in the Gulf “remain high, with US sanctions recently extended to more Iranian officials and a Chinese oil importer, as well as another tanker seizure”.
But the agency noted that Brent oil prices have eased back from the most recent high of $67/bbl, and shipping operations are at normal levels, albeit with higher insurance costs.
“The messages from various parties that vessels will be protected to the greatest extent possible, and the IEA’s recent statement that it is closely monitoring the oil security position in the Strait of Hormuz will have provided some reassurance.”
Oil prices rise
Oil prices continued to rise on Friday, wrapping up the week with a two-day rebound, as the number of U.S. active oil rigs declined sharply this week.
The West Texas Intermediate for September delivery rallied 1.96 U.S. dollars to settle at 54.50 dollars a barrel on the New York Mercantile Exchange, while Brent crude for October delivery rose 1.15 dollars to close at 58.53 dollars a barrel on the London ICE Futures Exchange.
In the week ending Aug. 9, U.S. oil rig count dropped by six to 764, marking the lowest level since February 2018, U.S. energy services firm Baker Hughes said in its weekly report on Friday.
The reading was also 105 lower than the 869 of the same week last year.
This week marked the sixth consecutive week that saw oil rig count falling and posted the most weekly declines in a row since March, according to Reuters.