IEA cuts oil demand growth forecast

The IEA has cut its forecast for global oil demand growth in 2019-20, as the prospects of a resolution to the US-China trade dispute worsen and evidence of an economic slowdown mounts.

The Paris-based watchdog's latest Oil Market Report (OMR) pegs demand growth for this year at under 1.1mn b/d, a reduction of 100,000 b/d from its previous projection, while next year's growth forecast has been cut by 50,000 b/d to 1.34mn b/d. "The outlook is fragile" and there is more chance of a further downward revision than an upward one, the IEA said.

The updated forecast takes into account the IMF's latest economic outlook, in which global GDP growth was downgraded by 0.1 percentage points for this year and next to 3.2pc and 3.5pc, respectively. "The [IMF's] downward revision was triggered by disappointing economic indicators in recent months, largely due to lower investment and consumer durables demand," the IEA said. "Uncertainties regarding world trade agreements, Brexit and the geopolitical environment may have delayed business and household decisions."

The impasse between the US and China in their trade dispute is fuelling concerns about the health of the global economy. "This could lead to reduced trade activity and less oil demand growth," the IEA said.

On the supply side, the IEA has tweaked its projection for non-Opec growth this year to 1.9mn b/d from around 2mn b/d in last month's OMR, as a result of a "slightly weaker forecast for Brazil". It expects the increase in non-Opec supply to accelerate to 2.2mn b/d in 2020 "as Brazil picks up speed and new projects start up in Norway and Guyana". This is slightly up on last month's 2020 growth projection of around 2.1mn b/d. The US remains the largest source of non-Opec supply growth in 2019 and 2020 under the IEA's forecasts.

The supply and demand balances leave the forecast call on Opec crude unchanged from last month's OMR at 30mn b/d for this year and just over 29mn b/d for next year. Argus estimates that Opec produced 29.6mn b/d last month.

OECD commercial oil stocks increased by 31.8mn bl in June, the third monthly increase in a row. "Preliminary data for July showed inventories falling in the US, and rising in Japan," the IEA said.