The International Energy Agency maintained its global oil demand forecast for 2019 despite trade war headwinds as falling oil prices will help make up for slower economic growth.
Global oil demand will reach 1.4 million barrels per day in 2019, up from 1.3 million bpd in 2018, the Paris-based energy watchdog said in a report on Friday. The IEA is more bullish than Opec, which is projecting an increase of 1.29 million bpd in oil demand in 2019, with lower Chinese demand growth compared with 2018 offset by an increase in consumption in Latin America and the Middle East from a year earlier.
“The impact of higher oil prices in 2018 is fading, which will help offset lower economic growth,” said the IEA, the energy watchdog for industrialised countries. “However, the mood music in the global economy is not very cheerful. Confidence is weakening in several major economies.”
Oil demand is being affected by signs of a slowing global economy as the trade war tensions between the US and China, the world’s two largest economies, intensify. The International Monetary Fund in October lowered its forecast for global economic expansion in 2019 to 3.7 per cent, the first time it cut its growth projections since July 2016. The fund cited the trade war, vulnerable emerging markets and sluggish growth in the eurozone as major contributors to its downgrade.
The gloomy economic growth outlook and an oil glut has contributed to a slide of more than 30 per cent in oil prices since reaching a four-year high of $86 a barrel in early October. Brent closed Friday up 1.5 per cent to $62.7 a barrel.
Opec, which pumps more than a third of the world’s oil, and producers led by Russia, commonly known as Opec +, started this month trimming output by 1.2 million bpd as crude demand begins to falter.
Opec alone lowered its output by 751,000 bpd in December to 31.58 million bpd, the biggest cut since Opec+ began trimming output in January 2017, according to second sources data quoted in Opec’s monthly report released last week.
The IEA is projecting US oil production will keep on rising in 2019 but at a slower pace than 2018, thanks to high shale oil output. US oil output, which had an “unexpected” growth of 2.1 million bpd in 2018, is set to expand by 1.3 million bpd in 2019, the energy watchdog said.
“While the other two giants voluntarily cut output, the US, already the biggest liquids supplier, will reinforce its leadership as the world's number one crude producer,” the IEA said. “By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.”
Saudi Arabia, which has an oil output capacity of 12 million bpd, pumped 10.55 million bpd in December and shouldered the bulk of the Opec cuts during that month, with a 468,000 bpd trim to its production, according to the secondary sources quoted by Opec.
Meanwhile Russia boosted its output to a new record of about 11.5 million bpd in December, according to the IEA.
“While Saudi Arabia is determined to protect its price aspirations by delivering substantial production cuts, there is less clarity with regard to its Russian partner,” the IEA said.