AIE sees growth in demand falling to the lowest in years

The International Energy Agency (IEA) has reduced its estimate of global oil demand growth for the second consecutive month on Friday, citing increased trade concerns over fears of a global recession.

The energy agency's watchful report comes as global oil markets have changed dramatically in recent months, shifting from supply-side risks, such as the reduction in OPEC production to US sanctions against Iran and Venezuela, to the fear of a decline in demand.

Crude futures dropped 45% in the first four months of 2019, dropping more than 15% since the beginning of April.

"The main goal, I think, that we should look at here is that, until recently, the geopolitical factors related to Iran, Venezuela and Libya … they were in the foreground people's concerns, "said Neil Atkinson, head of the industry and oil markets division IEA, told CNBC Friday on" Street Signs Europe ".

"We are now starting to see that confidence in demand is taking over, which is the main factor behind the current oil market situation."

The international benchmark, the Brent, has traded around $ 61.25 on Friday morning, down about 0.1%, while the West International Intermediate (WTI) US & UK Is set at $ 52.15, a decrease of almost 0.3%.

The recent drop in oil prices was temporarily reversed Thursday, following attacks on two oil tankers on one of the world's major shipping routes.

The incident in the Gulf of Oman off the Iranian coast pushed crude oil futures up to 4.5% in the previous session. It was the second time in less than a month that oil tankers were attacked in the world's largest oil supply area, with hundreds of millions of dollars worth of oil passing through the shipping lane every year.

Washington quickly accused Iran of being responsible for these attacks, but Tehran denied these accusations.

"I think we realize that, although we can not be complacent, the situation is not yet a major threat to the security of oil supplies in the very important Strait of Hormuz," Neil said. Atkinson of the IEA.

On the demand side, the IEA followed OPEC by downgrading its global oil demand growth forecast for 2019 on Friday.

The energy agency said it now expects oil demand growth of 1.2 million barrels a day (b / d) this year. This is a downward revision of 100,000 b / d compared to the previous projection of the IEA.

According to IEA estimates, global oil demand would have increased only 250,000 b / d from year to year in the first quarter of 2019, reflecting the weakest annual growth since the fourth quarter of 2011 – when the price of Brent averaged $ 109.

Beyond the end of 2019, the IEA predicts that global oil demand growth will reach about 1.4 million barrels per day by 2020.

"A first clear message from our first look at 2020 is that there is a lot of growth in non-OPE supply available to satisfy any likely level of demand, in the absence of geopolitical shock. major, and that the OPEC countries have 3.2 million b / d of capacity, "said IEA Friday.

"This is good news for consumers and the overall health of the currently vulnerable global economy, as it will limit upward pressure on oil prices."

The IEA cited different reasons for the slowdown in global oil consumption, including: a mild winter in Japan, a slowdown in the petrochemical sector in Europe, a demand for petrol and lukewarm diesel in the United States. United States and a deterioration of the commercial prospects.

The United States and China have imposed tariffs on billions of dollars of reciprocal merchandise since the beginning of 2018, hitting financial markets and harming consumer and business confidence.

The hope that business leaders from the world's largest economies reach an agreement on the sidelines of a G20 meeting in Osaka on June 28 and 29 has faded in recent days.

OPEC also cited persistent trade tensions between Washington and Beijing as a risk to economic growth and fuel demand.

The Middle East-dominated group said in a monthly report released on Thursday that oil production hit a five-year low in May. It comes at a time when OPEC and its allied partners are considering extending a six-month contract to limit their production.

Saudi Arabia, the leading oil exporter, has reached an agreement with the rest of OPEC, alongside Russia and nine other countries, on maintaining 1.2 million b / d on the market from the beginning of January. The Energy Alliance, often called OPEC +, said it would look closely at the economic outlook when it meets in the coming weeks.

"The key variable that complicates things for Saudi Arabia and OPEC + is a potential breakthrough between the US and China that would boost demand for oil – but this outcome is extremely unlikely," he said. said Ayham Kamel, director of the Eurasia Group's Middle East and North Africa Division. , said in a research note published Thursday.

"Even in such a scenario, OPEC + would still prolong the agreement but would adjust the quotas to allow for higher production," Kamel said.