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The International Energy Agency says it expects global oil demand to grow at the slowest pace since 2009, outside of the coronavirus pandemic, among early signs that US tariffs are placing emphasis on economic activity.
The Energy Advisory Board said it is expected that consumption will increase by just 700,000 barrels a day this year. This will be the smallest increase in demand annually since the aftermath of the global financial crisis, except in 2020, when demand was signed at 8.7mn B/D as the government shut down a key part of the economy to curb the spread of Covid-19.
In its monthly oil market report, the IEA said it trimmed its previous forecast of growth estimate of 720,000 b/d after lower demand than expected in the second quarter, particularly in emerging markets.
While the slowdown in growth over the past three months has been “partially weather-related,” the IEA has also flagged the impact of the economic uncertainty that US President Donald Trump’s shocking tariffs have created on many of his trading partners.
“It may be premature to attributing this slow growth to the harmful effects of tariffs manifesting in the real-world economy, but it has had the biggest quarterly contraction in a country at the intersection of tariff disruptions.”
These countries include China, Japan, South Korea and Mexico, with oil demand declining from the previous year at 160,000 b/d, 80,000 b/d, 70,000 b/d and 40,000 b/d respectively. In the US, oil demand fell 60,000 b/d, but emerging markets outside of Europe and Asia were proven to be “more resilient.”
The IEA forecast is in conflict with the OPEC+ oil cartel. This is predicted that demand will increase by 1.3 million B/D this year. OPEC leaders have become increasingly in Loggerheads as OPEC leaders have been directly criticising alleged political bias in recent years due to their divergent expectations of future demand.
Since April, OPEC+ members have unleashed years of production cuts originally designed to increase prices, claiming that demand is strong enough to absorb additional supply.
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The IEA said in its report that global oil production was 2.9 million b/d higher in June than a year ago, the IEA said in its report, adding that the 1.9mn B/d increase in its supply comes from OPEC+ members.
Given that OPEC+ is still being rewinded, global oil supply is projected to increase by 2.1mn b/d this year, surpassing the 105.1mn b/d demand.
Most traders hope that the surplus will put pressure on prices later this year, with some analysts forecasting a global benchmark, Brent crude, which falls below $60 per barrel in the fourth quarter.
On Friday morning, Brent was up 0.2%, at $68.80 per barrel.
