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The Worldwide Power Company has mentioned it expects world oil demand to develop on the slowest tempo since 2009, exterior of the coronavirus pandemic, amid early indicators that US tariffs are weighing on financial exercise.
The vitality advisory physique mentioned it anticipated consumption to extend by solely 700,000 barrels a day this yr. That may be the smallest rise in annual demand because the aftermath of the worldwide monetary disaster, except 2020 when demand contracted by 8.7mn b/d as governments shut key components of the financial system as a way to include the unfold of Covid-19.
In its month-to-month oil market report, the IEA mentioned it had trimmed its forecast from a earlier progress estimate of 720,000 b/d, after decrease than anticipated demand within the second quarter of the yr, notably in rising markets.
Whereas the slowdown in progress prior to now three months was “partly climate associated”, the IEA additionally flagged the impression of the financial uncertainty created by US President Donald Trump’s shock tariffs on many buying and selling companions.
“Though it might be untimely to attribute this slower progress to the detrimental impression of tariffs manifesting themselves in the true financial system, the biggest quarterly contractions occurred in international locations that discovered themselves within the crosshairs of the tariff turmoil,” it mentioned.
These international locations included China, Japan, Korea and Mexico, the place oil demand had fallen year-on-year by 160,000 b/d, 80,000 b/d, 70,000 b/d and 40,000 b/d respectively. Within the US, oil demand was down 60,000 b/d, whereas Europe and rising markets exterior Asia had proved to be “extra resilient”, it added.
The IEA’s forecast places it at odds with the Opec+ oil cartel, which has predicted demand will develop by 1.3mn b/d this yr. The 2 teams have more and more been at loggerheads in recent times due to their diverging expectations of future demand, with Opec leaders even immediately criticising the IEA for alleged political bias.
Since April, Opec+ members have been unwinding long-standing manufacturing cuts initially designed to push costs increased, arguing that demand was robust sufficient to soak up the extra provide.
International oil manufacturing was 2.9mn b/d increased in June than a yr earlier, the IEA mentioned within the report, including that 1.9mn b/d of that elevated provide had come from Opec+ members.
Given Opec+ remains to be unwinding cuts, world oil provide is forecast to rise by 2.1mn b/d this yr to 105.1mn b/d, outstripping demand of 103.7mn b/d, it added.
Most merchants anticipate that surplus to weigh on costs within the second half of the yr, with some analysts forecasting Brent crude, the worldwide benchmark, to fall under $60 a barrel within the fourth quarter.
On Friday morning Brent was buying and selling at $68.80 per barrel, up 0.2 per cent.
