Crude oil demand this year will grow by 1.4 million bpd, BP has estimated, despite growing worry about where the global economy is headed, which would affect demand for the most traded commodity in the world.
“We’re not actually seeing this worrying thought that it’s all going to start falling,” chief executive Robert Dudley told CNBC in an interview on the sidelines of the World Economic Forum in Davos.
With this, Dudley echoed the International Energy Agency’s Fatih Birol, who, at a panel discussion during the forum said the IEA projected crude oil growth at 1.3 million bpd this year, despite the expectations of a global economic slowdown.
Yet BP is more optimistic than the IEA about oil demand: in 2018, the daily growth rate was 1.3 million bpd, meaning this year it will intensify. That will come alongside an almost 3-percent growth in the U.S. economy and a 3-percent growth in the global economy.
However, other institutions don’t seem to agree with BP’s outlook. Earlier this week, the International Monetary Fund revised downwards its projection for the global economy by 0.2 percentage points to 3.5 percent this year, which is higher than BP’s estimate but still a downward revision, whose significance was immediately evident as crude oil benchmarks slumped yesterday.
What’s more, the U.S. Federal Reserve cut its own outlook for the world’s largest economy—and largest oil consumer—to 2.3 percent from 2.5 percent. Further, China’s economy grew at the slowest pace since 1990 last year, although the rate of growth itself, at 6 percent, was pretty high compared to developed economies. Still, BP is upbeat, as is the International Energy Agency.
“Cars are not the driver of oil demand growth. Full stop,” Birol said. The drivers of oil demand growth are trucks, the petrochemical industry, and planes, with Asia just starting to fly, the IEA’s head said during the panel. Related: Private Investment In Natural Resources Hits Record High
“We certainly don’t see it yet in the numbers,” Dudley told CNBC when asked about the difference between BP’s outlook and that of the IMF and other agencies. However, the BP chief executive admits there are headwinds.
The strongest one is Washington’s sanction war on Iran. If it pulls out the waivers it granted to eight importers of Iranian oil, prices could jump a lot higher than they are now, which would in turn affect demand in a pretty negative way. If the waivers are extended, prices will be a lot more stable.
In what was perhaps a disheartening statement for OPEC producers, Dudley also said, “The world probably needs a fairway for oil prices, and somewhere between $50 and $65 seems to be a fairway for producers and consuming countries.”
In fact, few OPEC producers would be happy with prices at US$65, but if Dudley and BP are right, this is the price range they should expect this year. Of course, disruptions are always a possibility, especially in Libya and Nigeria, so talking about any sort of price stability on oil markets would be premature. Interestingly enough, it is OPEC that has the lowest demand growth outlook for oil: the cartel earlier this month said it expected it at 1.3 million bpd, still a strong rate, though lower than BP’s and the IEA’s figures.
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By Irina Slav for Oilprice.com
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