The International Energy Agency (IEA) cut forecasts for growth in global oil demand, noting that fears of an economic slowdown are overshadowing the loss of supply during last month’s attack on Saudi Arabia, reportedBloomberg.
The IEA trimmed projections for demand growth this year and next by 100,000 barrels a day, nonetheless, after a brief rally, crude prices have eased back amid concerns of a global recession.
The IEA stated that there should be talk of a geopolitical premium on top of oil prices, adding that there is little sign of this with security fears having been overtaken by weaker demand growth and the prospect of a wave of new oil production from the US and the North Sea.
The IEA warned that, after Saudi Arabia’s Abqaiq and Khurais facilities were blasted by missiles and drones on 14 September 2019, further incidents of this nature could happen.
Global markets are poised to tighten during the rest of the year as demand recovers and Saudi Arabia as well as other Organisation of Petroleum Exporting Countries (OPEC) nations keep a lid on output, said the IEA.
The agency assumes consumption may expand by 1.6 million barrels a day in the Q2 2019, four times as much as in the first.
Still, prices are no higher than they were before the attack on the Kingdom, as the trade dispute between the USA and China as well as signs of a manufacturing slowdown stoke fears of a full-blown recession.
According to the IEA, global oil demand will increase this year by the least since 2016, by just one million barrels a day, while growth in the amount of crude processed by refineries worldwide will be the lowest in a decade, at just 150,000 a day.
Even though demand growth will accelerate next year to 1.2 million barrels a day, a further surge in production from the US and elsewhere could unleash another surplus, added the IEA.
While the attacks in Saudi Arabia squeezed output in the OPEC to the lowest since 2009, the IEA’s report indicated that the group is still pumping more than will be needed in the first half of 2020.