IEA Sees Oil Demand Growth Falling to Lowest Level in Years as Global Economy Stalls

(CNBC) – The International Energy Agency (IEA) slashed its estimate for global oil demand growth for the second consecutive month on Friday, citing intensifying trade concerns amid fears of a global recession.

The energy agency’s closely-watched report comes as world oil markets have undertaken a dramatic shift in recent months, switching from supply-side risks like OPEC’s output cuts or U.S. sanctions against Iran and Venezuela to worries about deteriorating demand growth.

Crude futures have turned a 45% price rally in the first four months of 2019 into a fall of more than 15% since the start of April.

“The main focus I think we should be looking at here is that until very recently the geopolitical factors related to Iran and Venezuela and Libya… they were at the forefront of people’s minds,” Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC’s “Street Signs Europe” on Friday.

“Now we are starting to see that confidence in demand is taking over and that is the main driving factor behind the current state of the oil market.”

International benchmark Brent crude traded at around $61.25 Friday morning, down around 0.1%, while U.S. West Texas Intermediate (WTI) stood at $52.15, nearly 0.3% lower.

A recent slide in oil prices was temporarily reversed on Thursday, following attacks on two oil tankers in one of the world’s key shipping routes.

The incident in the Gulf of Oman off the coast of Iran pushed crude futures up as much as 4.5% in the previous session. It was the second time in less than a month that tankers had been attacked in the world’s most important zone for oil supplies, with hundreds of millions of dollars’ worth of oil passing through the shipping lane every year.

Washington quickly blamed Iran for the attacks, but Tehran has denied the allegation.

“I think we are realizing that, although we cannot be complacent, the situation is not yet representing a major threat to the security of oil supplies to the very important Strait of Hormuz,” the IEA’s Neil Atkinson said.

On the demand side, the IEA followed OPEC by downwardly revising its global oil demand growth forecast for 2019 on Friday.

The energy agency said it now expects oil demand growth to reach 1.2 million barrels per day (b/d) this year. That’s a downward revision of 100,000 b/d from the IEA’s previous projection.

Global oil demand is estimated to have risen by just 250,000 b/d year-on-year in the first quarter of 2019, the IEA said, reflecting the lowest annual growth since the fourth quarter of 2011 — when the price of Brent averaged $109.

Looking beyond the end of 2019, the IEA expects global oil demand growth to rebound to around 1.4 million b/d in 2020.

“A clear message from our first look at 2020 is that there is plenty of non-OPEC supply growth available to meet any likely level of demand, assuming no major geopolitical shock, and the OPEC countries are sitting on 3.2 million b/d of spare capacity,” the IEA said Friday.

“This is welcome news for consumers and the wider health of the currently vulnerable global economy, as it will limit significant upward pressure on oil prices.”