IEA Cuts 2019 Global Oil Demand Outlook, sees 2020 Upturn
CRANBURY, N.J. (DTN) -- The International Energy Agency revised projected
world consumption for oil lower for a second month, pointing to slower economic
growth than previously expected, while seeing a recovery in demand in 2020.
IEA noted the market's attention has turned from concern over supply
availability to worry over oil demand as sentiment for the global economy
weakens. The Paris-based energy watchdog for consuming nations noted their
downward revision for world oil consumption follows a decline in projected
global gross domestic product growth by the Organization for Economic
Cooperation and Development in May when the 36 country bloc lowered its world
GDP forecast to 3.2%.
Analysts with IEA added, "World trade growth has fallen back to its slowest
pace since the financial crisis ten years ago, according to data from the
Netherlands Bureau of Economic Policy Analysis and various purchasing managers'
IEA cut its 2019 demand outlook by 100,000 bpd from its May projection, and
has now lowered expected world oil consumption by 190,000 bpd over the past two
months for consumption of 100.3 million bpd, setting year-on-year growth at 1.2
million bpd. IEA expects annual global oil demand growth to expand to 1.4
million bpd in 2020.
Oil supply from countries that are not part of the Organization of Petroleum
Exporting Countries is expected to increase annually by 1.9 million bpd to 64.6
million bpd this year, unchanged from its projection in May. IEA expects 90% of
that growth to be produced in the United States. Annual non-OPEC supply growth
accelerates to 2.3 million bpd in 2020, as increases in Brazil, Canada, and
Norway add to U.S. gains.
OECD commercial oil inventory is 16 million bbl above the five-year average
following weak demand in the first quarter when demand was up a modest 300,000
bpd against year ago following strong growth in the fourth quarter 2018. First
quarter demand growth was the weakest since the fourth quarter 2011.
"The main weakness was in OECD countries where demand fell by a significant
0.6 mb/d, spread across all regions," said IEA. "There were various factors: a
warm winter in Japan, a slowdown in the petrochemicals industry in Europe, and
tepid gasoline and diesel demand in the United States, with the worsening trade
outlook a common theme across all regions."
First quarter demand weakness generated a 1.1 million bpd supply surplus
during the first three months of the year. However, IEA said the surplus turned
into a 400,000 bpd deficit in the second quarter, "with the backwardated price
structure reflecting tighter markets."
Additional price support could come in the third quarter on a pickup in
"Recently, high levels of maintenance in the US and Europe, low runs in
Japan and Korea, and fallout from the Druzhba pipeline contamination
contributed to weak growth in global refining throughput," said IEA.
The agency said the market might be on the verge of change, projecting crude
runs to be as much as 4 million bpd higher in August than in May, tightening
the crude market which could be worsened due to a lack of sour barrels amid
U.S. sanctions on Iran and Venezuela and with an extension of OPEC production
Non-OPEC supply growth is expected to adequately satisfy 2020 demand
requirements provided there is no geopolitical shock, said IEA. The agency also
notes OPEC spare capacity of 3.2 million bpd.
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