• 4 minutes 2nd Annual Great Oil Price Prediction Challenge of 2019
  • 7 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 10 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 13 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 22 mins More dumbed down? re Hong Kong Act of Congress
  • 21 hours EU has already lost the Trump vs. EU Trade War
  • 21 mins U.S. Shale Output may Start Dropping Next Year
  • 56 mins Winter Storms Hitting Continental US
  • 2 hours U.S. Shale To Break Records Despite Bearish Rhetoric
  • 46 mins Aramco IPO magic trick
  • 24 hours Pope Proposes New Sin: Thou Shalt Not Destroy The Harmony Of The Environment
  • 19 hours What are the odds of 4 U.S. politicians all having children working for Ukraine Gas Companies?
  • 5 hours Petroleum Industry Domain Names
  • 2 hours Crazy Stories From Round The World
  • 1 day Article: Did Exxon only make $39 Million onshore U.S. last quarter ?
  • 20 hours PennEast Appealing Wacky 3rd Circuit Decision to Supreme Court
  • 1 day Visualizing Pennsylvania Oil & Gas Production (Through September 2019)
  • 1 day Last I Checked
  • 20 hours China 2019 - Orwell was 35 years out

Breaking News:

UK Oil Sector May Be Hit With More Taxes

Alt Text

This European Nation Is Planning A Complete Offshore Oil Ban

Under pressure from environmentalists, Ireland…

Alt Text

The Worst Is Over For Oil Markets

It has been a tough…

Alt Text

The Next Stage Of The Electric Vehicle Boom

As the electric vehicle boom…

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. 

More Info

Premium Content

IEA Draws Gloomy Oil Demand Outlook For 2020

The International Energy Agency (IEA) cut its oil demand forecast yet again, citing the weakening global economy.

In its latest Oil Market Report, the agency predicts that demand will grow by 1 million barrels per day (mb/d) in 2019 and 1.2 mb/d in 2020, both of which are downward revisions by 100,000 bpd from previous estimates.

It is the latest in a series of downgrades to demand forecasts, as the weakening economy continues to slow consumption growth. Notably, despite the downgrade, the tone from the IEA still seems relatively upbeat. The agency said that its downgrade for 2019 had more to do with revisions to its 2018 data than anything else, and it sees demand on the upswing, at least relative to earlier this year.

The agency pegged oil demand growth in the first half of 2019 at shockingly weak 0.4 mb/d year-on-year. But it sees demand growth rebounding strongly in the second half of this year to 1.6 mb/d. The IEA adds that low prices could stoke demand.

While the IEA is optimistic that the second half of the year will be vastly stronger than the first half, a lot of the economic data is trending in the wrong direction. Global trade volumes are only set to grow by 1.2 percent this year, down from around 3 percent last year. Industrial production is also stagnating. Car sales, manufacturing activity and a variety of other indicators are raising red flags. “The slowdown in trade volumes has already affected bunker deliveries. It has also had a strong impact on truck transportation and thus diesel consumption,” the IEA said.

A majority of economists say that the U.S. is now in a manufacturing recession, which is notable since the U.S. economy held up a bit longer than some other major economies.

Related: Big Oil Fights For Its Life

Meanwhile, the IEA also noted that the global oil market “withstood a textbook case of a large-scale supply disruption” in September when the Abqaiq facility was attacked and 5.7 mb/d of supply was temporarily knocked offline. Saudi Aramco’s rapid repairs and swift turnaround pushed oil prices back down pretty quickly.

Oil watchers are still marveling at the lack of a geopolitical premium on prices despite such a massive outage and the prospect of further attacks. “Intuitively, the precision attacks on Saudi Arabia and the possibility of a repeat should keep the market on edge. There should be talk of a geopolitical premium on top of oil prices,” the IEA said in its report. “For now, though, there is little sign of this with security fears having been overtaken by weaker demand growth and the prospect of a wave of new oil production coming on stream.” For instance, Norway just brought its Johan Sverdrup oil field online, which will add 440,000 bpd by the middle of next year.

Inventories remain large, and the “market is the first responder to a supply crisis,” as the IEA put it. In August, OECD inventories rose once again, the fifth consecutive monthly increase. Stocks are now back close to the 3-billion-barrel level, a large stockpile that was common during the 2016 bust. “We might have quickly returned to business as usual, but security of supply remains very relevant,” the IEA cautioned. Related: Volkswagen Denies It’s Interested In Buying Stake In Tesla

Still, the immediate future will largely be dictated by the outcome of the U.S.-China trade war and the trajectory of the global economy. Oil demand growth of 1 mb/d for 2019 is the weakest figure since 2016, and it could yet prove to be overly optimistic. After all, the IEA has made a successive wave of cuts to its forecast, seemingly surprised by the depth of the economic slowdown.

At the time of this writing, the outcome of the latest round of trade negotiations was unclear, but President Trump tweeted more than once about the positive atmosphere. Markets rose on the news.

The problem for the oil market is not just one of weak demand and a slowing economy. But supply also continues to grow. The IEA says that non-OPEC supply could expand by 1.8 mb/d in 2018 and 2.2 mb/d in 2020. Both figures significantly outpace demand growth. That raises the pressure on OPEC+ to extend the production cuts or even deepen them.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play