The slowing down of the global economy, partially because of the trade war between the United States and China has forced the International Energy Agency (IEA) to bring down its oil demand forecast for 2019

The executive director of the international agency Fatih Birol said that the IEA is currently readjusting its demand forecast for crude globally for 2019 to 1.1 million barrels per day (bpd). He added that the body could cut down forecast and projections further if there is further evidence of weakness in demand because of slowing global economy and especially if there is further slowdown in China.

The IEA forecast last year that the demand for oil for 2019 would grow by 1.5 million bpd but was forced ot cut down its forecast in June this year to 1.2 million bpd.

“China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies … if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come,” Birol said in an interview to the news agency Reuters.

Currently, the global oil market has plentiful supply of crude because of rising shale oil production in the United States but the demand of roil has been curtailed because of the trade war between the US and China, he said.

Birol said that there is an expected addition of 1.8 million bpd in US oil in 2019 which would be lower than what was clocked by the industry in 2018 at growth of 2.2 million bpd. He added that “these volumes will come into a market where demand growth is coming down”.

Current events in the Middle East have raised tensions there, he said. He added that the concerns of the IEA were specifically because of the recent attacks on oil tankers in and around the Strait of Hormuz which is considered to be a vital international water passage way for shipping that is used extensively for shipping of oil from the Gulf region to customers in Asia, Europe, North America, among other regions. The blame of those attacks, which took place in May and June of this year, have been placed on Iran by the United States. Iran has denied the allegations.

“We are keeping a close eye on what is happening there. And if something happens we are ready to act quickly and decisively,” he said, after reports that Iran had seized a foreign tanker smuggling fuel in the Gulf.

Birol said that the Strait is used for shipping of about a third or 20 million bpd of the oil traded globally.

Some of the major oil producers are now seeking alternative routes. For example, Iran is planning to dump more oil through Turkey’s port of Ceyhan and build new pipelines to deliver oil to ports in Syria, Lebanon and Saudi Arabia.

“In the very short-term, the effect of those options are not very huge. We should think of options and work on them. They will not bring a major change in the current markets but will be helpful in the medium and longer term,” Birol said.

(Adapted from Reuters.com)

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