PARIS: Tepid growth in demand for oil along with ample supplies from non-OPEC countries will complicate efforts by the cartel and its allies to boost prices, the IEA said in a report Friday.
The focus in oil markets in recent months and days has been on supply issues — from US sanctions on Iran and Venezuela to tanker attacks near the Strait of Hormuz — which has helped OPEC and its allies, which are often called OPEC+, in their efforts to prop up prices by cutting back output, reports AFP.But the International Energy Agency said that now “the main focus is on oil demand as economic sentiment weakens”.
It cited data that world trade growth has fallen to its lowest level since the financial crisis a decade ago amidst the burgeoning US trade wars, which have already begun to have an impact on demand for oil.
In the first three months of this year global demand for oil rose by only a meagre 300,000 barrels per day, the lowest quarterly increase in nearly eight years.
While there were some idiosyncratic factors such as weather, the IEA said “the worsening trade outlook (was) a common theme across all regions.”
The IEA cut its forecast for oil demand growth this year for the second month straight and trimmed its second quarter forecast as well.
While in its first estimates for 2020 the IEA sees oil demand accelerating, this is more than matched by output gains from nations outside OPEC+.It put the increase of non-OPEC supplies at 2.3 million barrels per day (mbd) in 2020 while global demand is seen as increasing by 1.4 mbd. In 2019, the 1.9 mbd increase in non-OPEC supplies is also expected to outweigh the 1.1 mbd increase in demand.
“A clear message from our first look at 2020 is that there is plenty of non-OPEC supply growth available to meet any likely level of demand…” said the IEA.
“This is welcome news for consumers and the wider health of the currently vulnerable global economy, as it will limit significant upward pressure on oil prices,” said the Paris-based institution that provides advice to oil-consuming nations.
The data comes as ministers from the OPEC+ nations are due to meet later this month to debate whether to continue their production restraints.
With the IEA saying its forecast “means the tightening of oil markets could prove short lived”, OPEC+ nations may have to consider stepping up their cuts to maintain leverage on prices.