Oil prices fell again on Wednesday, falling to mark the demand for oil and growing fears of an economic downturn.
MKB reported another jump in crude oil inventory last week with 2.2 million barrels, which contributed to worsening the point of sale. A number of inventory gains have led to fears of weak demand at a time when other economic indicators are flashing red.
Demand is largely weakening due to weakening of the world economy. Weak indicators continue to emerge from China and Europe, as well as in the United States. As John Kemp points out for Reuters, large-scale trade jams around the world show a sharp decline in world trade, with freight volumes declining significantly compared to last year, suggesting that the world economy is on the brink of a recession.
"Demand expectations for 201
The deterioration in demand One by oil is finally recognized by large oil forecasters. The EIA said on Tuesday that 2019 global crude demand would be lower than previously expected. In the agency's short-term Energy Outlook, the demand estimate dropped to 1.2 million barrels per day (mb / d), almost 200,000 bpd lower than last month's projection. "Lower EIA 2019 Burned Price Path Reflects Increasing Uncertainty About Global Oil Demand Growth," The Authority says, justifying a downward adjustment of $ 3 a barrel. Meanwhile, US shale production is expected to grow by less than expected due to lower prices.
But a number of Wall Street banks are much more pessimistic than EIA and IEA. Morgan Stanley sees demand grow by 1 million barrels per day (mb / d). JPMorgan Chase grows 800,000 bpd in 2019, nearly 40 percent lower than the IEA's 1.3 mb / d estimate.
Nevertheless, economic darkness increases the odds of an extension of the OPEC + cuts, which can prevent a deeper slippage in oil prices. "Expanding the production agreement by another six months should prevent over-consumption in the oil market and support price recovery in the second half of the year," wrote Commerzbank in a note.
Saudi Arabian and Russian officials apparently discussed a scenario where oil could fall below $ 40 a barrel, although it seems inconceivable that the group would not expand its production cuts. "A scenario when they do not expand cuts will not be pretty," Warren Patterson, trading strategist at ING, told Wall Street Journal. First, Goldman Sachs analysts see an expansion likely, with key OPEC + members (ie Saudi Arabia) balancing the market on a monthly basis. foundation ahead – ramping production up or down depending on what the market needs. This would indicate that the group goes a long way in maintaining a balance between supply and demand. Goldman provided a forecast of USD 65.50 per barrel for the third quarter.
However, the Investment Bank acknowledged that a sharp decline in demand would throw this scenario out of the window. OPEC could not cut fast enough to keep pace with the decline in demand. "OPEC production adjustments have historically not been able to match the rate of decline in demand during the recessions, leading to rising inventories, contracts and lower prices," writes Goldman analysts, adding that such an outcome still does not to be unlikely.
But worryingly, the Trump administration's ongoing trade crisis with China, which could still escalate into a new phase. Earlier this week, Trump said he could go on tariffs on the remaining $ 300 billion of Chinese imports by Xi Jingping refusing to meet him later this month in Japan on the sidelines of the G20 summit. He added that he could impose a 25 percent fee, or "much higher than 25 percent."
By Nick Cunningham from Oilprice.com
More top readings from Oilprice.com: