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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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The Most Overlooked Risk In Oil Markets

The global economy is once again showing some worrying signs of a slowdown, opening up a major downside risk to oil prices.

Global trade volumes are declining for the first time since the end of the 2008-2009 financial crisis, according to Reuters. Between December and February trade volumes contracted by 0.8 percent compared to the same period a year earlier. John Kemp of Reuters says the global economy is “one more shock away from recession,” pointing to a series of worrying indicators, including a contraction in cargoes at Hong Kong’s International Airport (the world’s busiest air cargo hub), falling volumes of shipping containers through the U.S. Port of Long Beach, and declining freight rail shipments in the U.S.

The IMF downgraded its estimate for global growth in early April, the fourth downgrade to its 2019 forecast in nine months. The Fund cited “the escalation of US-China trade tensions, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion.”

While growth is still positive,…





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  • Mamdouh Salameh on May 01 2019 said:
    If one listens to projections by John Kemp of Reuters, one would think we are already in recession. Mr Kemp has got his projections wrong time and time again that one is well advised to ignore them.

    Contrary to Mr Kemp’s projections, global oil demand is solid and the fundamentals of the global economy are robust.

    Oil prices are underpinned by a strong global oil demand adding 1.45 million barrels a day (mbd) this year over 2018, rock solid Chinese oil imports projected to hit 11 mbd this year, a Chinese economy growing at 6.4% this year beyond the projected 6.3%, a confirmed slowdown in US production and a tightening global oil market caused by OPEC+ production cuts.

    A delay in reaching a deal to end the trade war between the United States and China continues to cast some uncertainty over the global economy. However, sooner or later a deal will be reached because President Trump badly needs it. The US economy has been suffering far more adversely than China’s economy as manifested by a 49% decline in US farm sales’ profits from $136.1 bn in 2013 to 69.4 bn in 2018 as a result of the trade war. China’s economy is 28% bigger based on purchasing power parity (PPP) and more integrated in the global trade system that the US economy, hence its ability to withstand the trade war better.

    Still, an end to the trade war will remove uncertainty and provide a lift to the global economy.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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