If the pace of global economy deteriorates further, the International Energy Agency (IEA) could revise down again its oil demand growth expectations for this year and next, the IEA’s executive director Fatih Birol told Reuters on Friday.
“It will depend on the global economy. If the global economy weakens, for which there are already some signs we may lower oil demand expectations,” Birol said on the sidelines of a forum in South Korea.
The IEA and many other organizations and analysts, including OPEC, have trimmed their oil demand growth estimates several times this year already, on the back of signs of slowing economic growth in the world, also due to the U.S.-China trade spat.
The IEA’s latest downward revision to oil demand growth came in its August Oil Market Report, in which the Paris-based agency cut its forecast by 100,000 bpd to 1.1 million bpd for 2019, after seeing that between January and May demand growth was just 520,000 bpd, the lowest increase for the period since 2008. The IEA also revised down in August its oil demand growth estimate for 2020, by 50,000 bpd to 1.3 million bpd.
In its latest Oil Market Report published in September, the IEA kept its August forecasts unchanged, expecting 1.1 million bpd demand growth this year and 1.3 million bpd oil demand growth for next year.
“For 2H19, we assume no further deterioration in the economic climate and in trade disputes. Oil demand growth will be significantly higher helped by a comparison versus a low base in 2H18, lower oil prices versus a year ago and additions to petrochemicals capacity,” the agency said in the report on September 12.
The IEA, however, warned that even if the oil market is tightening in the very short term, OPEC will be facing a “daunting” challenge in managing the market in 2020, when returning to a significant surplus would place pressure on oil prices.
Speaking to Reuters on Friday, the IEA’s Birol said that the lowest pace in Chinese economic growth in decades could pressure oil demand growth downward, but on the other hand, the lower oil prices compared to last year put an upward pressure on demand.
By Tsvetana Paraskova for Oilprice.com