The Strategist

IEA lowers energy demand growth forecast for 2019

08/12/2019 - 14:36

In 2019, global oil demand this year will grow by only 1.1 million barrels per day (bpd) as the growth in January-May has been minimal since 2008, follows from the August forecast of the International Energy Agency (IEA). While the market is not in danger of oversupply, the OPEC + participants in July fulfilled its conditions by 134%. Moreover, the potential demand for cartel oil in the coming months will be higher than the current level of production. However, the situation will change at the beginning of 2020, when the United States will increase supply, the IEA warned.

The increase in world oil demand this year will be even weaker than expected, and will amount to only 1.1 million bpd, up to 100.4 million bpd (the forecast was lowered by 100 thousand bpd), says the IEA's monthly oil market review. Next year, it may increase to 1.3 million bpd, but this estimate was also lowered by 50 thousand bpd. In May (this is the last month for which actual data on demand is available), the indicator in annual terms decreased by 160 thousand bpd, and since the beginning of the year, demand has grown by only 520 thousand bpd. This is the minimum since 2008.

Although there is now a temporary decrease in oil surplus on the market amid a decrease in production by participants in the OPEC + transaction, other producers will soon increase supplies, so that in 2020 there will be a sufficient supply on the market, the report shows. The forecasted demand for cartel oil (calculated as the difference in supply and demand of other countries) in the third quarter will increase to 30.6 million bpd, which is 940 thousand bpd higher than the current level. However, this figure may drop to 28.4 million bps already at the beginning of 2020, the agency believes. 

According to the IEA, in July the total supply of oil in the world hasn’t fallen significantly (by 60 thousand bpd to 100.2 million bpd). Yet, for the first time since the fall of 2017, year-on-year production showed a decrease 580 thousand bpd. Over the month, deliveries outside OPEC have grown by 160 thousand bpd (the year-on-year figure was higher by 1.4 million bpd). By the end of 2019, their growth will reach 1.9 million bpd (against 2.8 million bpd a year earlier), but in 2020 it will accelerate to 2.2 million bpd, the agency expects.

OPEC supplies in July fell by another 190 thousand bpd to 29.71 mln bpd, including Saudi Arabia reduced production by 120 thousand bpd (to 9.65 million bpd - the lowest since February 2015), Iran - against the backdrop of sanctions - by 50 thousand bpd (up to 2.23 million bpd), Venezuela - by 60 thousand bpd (up to 810 thousand bpd). In total, the participants in the OPEC + transaction exceeded the goals for the fifth consecutive month. In July these countries extracted 43.85 million bpd, while the agreement provides for a level of 45.46 million bpd.