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Global Oil Market 2020 Outlook - OECD

Gasoil News - Published on Mon, 17 Jun 2019

Image Source: Moneycontrol
OECD said that volatility has returned to oil markets with a dramatic sell-off in late May seeing Brent prices fall from USD 70 per barrel to USD 60 per barrel. Until recently, the focus has been on the supply side with the familiar list of uncertainties, Iran, Venezuela, Libya, and the Vienna Agreement, lifting Brent prices above USD 70 per barrel in early April and keeping them there until late May. Not that supply concerns have gone away: oil prices initially increased by 4% on news of the attacks on two tankers in the Gulf of Oman, before easing back slightly.

Now, the main focus is on oil demand as economic sentiment weakens. In May, the OECD published an outlook for global GDP growth for 2019 of 3.2%, lower than our previous assumption. World trade growth has fallen back to its slowest pace since the financial crisis ten years ago, according to data from the Netherlands Bureau of Economic Policy Analysis and various purchasing managers’ indices.

The consequences for oil demand are becoming apparent. In Q1 2019, growth was only 0.3 million barrel per day versus a very strong Q1 218, the lowest for any quarter since Q4 2011. The main weakness was in OECD countries where demand fell by a significant 0.6 million barrel per day, spread across all regions. There were various factors: a warm winter in Japan, a slowdown in the petrochemicals industry in Europe, and tepid gasoline and diesel demand in the United States, with the worsening trade outlook a common theme across all regions. In contrast, the non-OECD world saw demand rise by 0.9 million barrel per day, although recent data for China suggest that growth in April was a lacklustre 0.2 million barrel per day.

In 2Q19, we see global demand growth 0.1 million barrel per day lower than in last month’s Report. For now though, there is optimism that the latter part of this year and next year will see an improved economic picture. The OECD sees global GDP growth rebounding to 3.4% in 2020, assuming that trade disputes are resolved and confidence rebuilds. This suggests that global oil demand growth will have scope to recover from 1.2 million barrel per day in 2019 to 1.4 million barrel per day in 2020.

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Posted By : Sanju Moirangthem on Mon, 17 Jun 2019
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