OECD CLIs suggest long road to demand recovery

The OECD's latest monthly composite leading indicators (CLI) survey collapsed again in April for all major economies except China, suggesting substantially reduced oil demand towards the end of this year.

The CLI survey is designed to anticipate turning points in economic activity relative to trend 6-9 months ahead. The data released today show a second month of sharp slowdowns across almost all of the surveyed countries and regions.

The exceptions are for India, albeit where the growth cycle outlook is for a slowdown, and for China, where the OECD said there are tentative signs of positive change in momentum. It added a proviso that only partial information is available for China in April.

In fact, the OECD flagged that uncertainty surrounding the duration of lockdown measures implemented to choke the spread of Covid-19 has complicated the ability of the CLIs to provide reliable forward-looking signals. The rapidity of the Covid-19 spread led the Paris-based organisation to cancel its survey in February; on resumption, its March CLI data showed a drastic change from the stable growth momentum seen in January to the sharp slowdowns that have continued into April.

Some countries have begun lifting the lockdown measures, and there have been some signs that this has boosted prompt gasoline demand from decades-low levels in some of the world's most important hubs, like New York Harbor and in Asia-Pacific. Conversely, diesel demand has begun to flag and there are as yet few signs of a return to pre-virus levels of air travel.

Indeed, the CLI survey suggests any recovery will be long and slow. The IMF's latest projections are for a 3pc contraction in the global economy this year, and the IEA, in its most recent Oil Market Report (OMR), pegged global oil demand at 90.5mn b/d this year, down by more than 9pc from 2019. The IEA will update its forecast in its next OMR, which is due to be published on 14 May.

By Ben Winkley