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Growth in oil demand has been weakest for almost a decade



The global oil demand continues to see downgrades from major energy forecasters, with several downgrades over the past week.

The US EIA said in its short-term energy forecasts that it expects oil demand to grow by just 0.9 million barrels per day (mb / d) this year, the latest in a series of downgrades by the agency. In July, it said demand from 2019 would increase by 1.1 mb / d, and in June it said 1.2 mb / d. EIA started the year expecting demand to grow by 1.5 mb / d this year.

The point is not to pick out the EIA – just about every major forecast has been forced to reduce the number dramatically – but rather the global economy has slowed down by a lot more than expected. If the approximately 890,000 bbd demand growth figure passes as the EIA now forecasts, it would be the first time since 201

1 that oil demand increased by less than 1 mb / d.

OPEC also cut the forecast to about 1 mb / d in its latest report , down 80,000 bd per month from last month, citing a declining global economy. "This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential market imbalance," OPEC said in its report. At the same time, the cartel's production increased by 136,000 bpd in August from a month earlier, led by a significant increase from Saudi Arabia.

The US and China trade wars are the largest growth in economic growth. China's car sales fell by about 13 percent during the first half of the year compared to the same period in 2018. Car sales have now fallen in 14 of the last 15 months. India's car sales have also plunged lately, falling by as much as 41 percent in August from a year earlier.

"We got away from meetings with energy consumers in China last week with greater confidence that we are likely to see deceleration in China's oil demand growth by 2020 by 2019. There was little direct habilitation, unlike meetings at last year's conference," Goldman Sach analysts wrote in a note after a trip to China: "Companies / investors in our talks were largely not optimistic that we would see a resolution of US-China trade tensions over the next 6-12 months." [19659007] Related: Oil markets face serious risk of new supply crunch

The investment bank said there are drawbacks to expected demand due to the odds of further economic downturn, Goldman estimates that Brent will average only $ 60 per barrel by 2020.

"There is simply no strong engine for growth in the market. Large economies are limited by geopolitical uncertainty (Trade War / Brexit), while emerging / developing economies have to do with this and relatively high prices, "Richard Gorry, CEO of JBC Asia in Singapore, told Reuters.

Low oil prices are delivering lower activity, which can still lead to slower production growth and higher oil prices. But for now, cuts in the slate are hitting so much that the service industry is heading into a recession and direct contraction, according to Rystad Energy.

Goldman Sachs says that OPEC + cuts will be needed through 2020, and it is not until 2021 that things start to tighten up. Then the "meaningful decline for long dependency on project periods" will begin to become known. These are the projects that were scrapped after the 2014-2016 oil bust. Several years later, a lack of new projects is expected to lead to a decline in new supply. Goldman also says that US shale growth will be reduced, removing another source of supply growth that has characterized the oil market over the past decade.

Until then, however, the oil market will remain in the doldrums.

There are some indications that the US and China are itching for an agreement. China said on Wednesday that it will exempt some products from the planned tariffs, a small olive branch aimed at spreading tensions. The move comes ahead of a scheduled meeting between the two sides in October. It is not clear what may be due to this move, but it is conceivable that the United States could respond with something too, perhaps a delay in scheduled tariffs.

Still, a major trade breakthrough is still far away. Meanwhile, oil prices are slowing.

By Nick Cunningham of Oilprice.com

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