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Ross McCracken

Ross McCracken

Ross is an energy analyst, writer and consultant who was previously the Managing Editor of Platts Energy Economist

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Why OPEC Wants Oil Below $60

OPEC

In its June oil market report, the International Energy Agency (IEA) revised downward its global oil demand forecast for 2019 for the second consecutive month, this time by 100,000 b/d to 1.2 million b/d. It said that in first-quarter 2019, global oil demand had risen by just 250,000 b/d – “the lowest annual growth registered since 4Q11, when the price of Brent crude oil averaged $109/bbl.”

The agency also revised downward its second-quarter 2019 oil demand growth estimate by 300,000 b/d, reflecting lower than expected Chinese demand of 230,000 b/d in April, “owing to significant downgrades for diesel and LPG.”

These estimates incorporated new GDP forecasts from the OECD published in May. The OECD estimates a drop in global GDP growth this year to 3.2% from 3.5% last year and 3.7% in 2017. Growth in 2019 and 2020 (3.4%) will be “well below the growth rates seen over the past three decades, or even in 2017-18.”

The OECD’s assessment of the global economy was gloomy, pointing to the impact of trade tensions on business investment and trade growth, both of which have fallen sharply. Manufacturing production has contracted, and while the services sector has held up well, the OECD warned that it is “unlikely that they [services] decouple for long from manufacturing.”

Trade war impact

The OECD’s weak growth outlook is based on no further deterioration in trade relations but did not include…




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