Oil demand growth at decade low

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Global oil demand in the first half of 2019 grew at its slowest pace since 2008, hurt by increasing signs of economic slowdown. (Shutterstock)
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Updated 10 August 2019

Oil demand growth at decade low

  • Mounting signs of a global economic slowdown outweigh potential supply interruptions

LONDON: Mounting signs of an economic slowdown and a ratcheting up of the US-China trade war have caused global oil demand to grow at its slowest pace since the financial crisis of 2008, the International Energy Agency (IEA) said.

The IEA said global oil demand in the first half of 2019 grew at its slowest pace since 2008 hurt by mounting signs of an economic slowdown and a ramping up of the US-China trade war.

Rystad Energy said the oil market was going “from gloomy to gloomier,” calling into question the consultancy’s own bullish view for the first part of 2020.

“Economic recession risk and further escalation of the US-China trade war are key concerns in the near term. How long OPEC+ is willing to continue to manage production adds uncertainty,” said Bjørnar Tonhaugen, head of oil market analysis at Rystad Energy.

The Organization of the Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC+, agreed in July to extend their supply cuts until March 2020 to boost oil prices.

Russia’s energy ministry said IEA’s estimates were largely in line with its own forecasts and that Moscow had taken into account the possibility of a slowdown in oil demand when it extended an output cut deal with OPEC.

“Market focus in oil has clearly shifted. It is squarely on future demand, rather than on supply,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.

Saudi Arabia plans to maintain its crude oil exports below 7 million barrels per day in August and September to bring the market back to balance and help absorb global oil inventories, a Saudi oil official said on Wednesday.

The UAE also will continue to support actions to balance the oil market, Energy Minister Suhail Al-Mazrouei said in a tweet on Thursday.

Oil prices rose on Friday, supported by expectations of more OPEC production cuts.

Brent crude futures were up 89 cents at $58.27 a barrel in early trade while (WTI) futures were at $53.33 per barrel, up 79 cents.

“Despite a further cut in oil demand growth by the IEA, oil prices are trading marginally higher, as the demand growth cut was already announced previously by the head of the IEA and the agency still expects larger inventory draws for 2019,” UBS analyst Giovanni Staunovo said.


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.