18 Oct 2019: Oil demand for next year does not look promising
While tanker rates went through a record-breaking rollercoaster ride during the last two weeks, reports from the main agencies that forecast oil demand growth were notably less bullish. Last week, the International Energy Agency (IEA) cut its estimate for global oil demand growth in 2019 to 1.0 million barrels per day (mb/d), a reduction of 65,000 b/d. For 2020, they now expect 1.2 mb/d growth, about 100,000 b/d less than their previous forecast. The IEA cited a weakening outlook for the major global economies as the main reason for its outlook revision. The short-term outlook of the U.S. Energy Information Administration (EIA) is also more bearish. The October 2019 issue shows lower growth for 2019 (-50,000 b/d) and 2020 (-100,000 b/d). OPEC has also slightly reduced its 2019 estimate, although it did not change the 2020 growth outlook in its latest report. To top it off, the IMF has also reduced its outlook for the world economy. It expects that growth this year will be the weakest since the 2008 global financial crisis. After 3.6% growth in 2018, this year’s global expansion falls to 3.0%, with a slight rebound to 3.4% in 2020. These numbers are 0.2% (2019) and 0.1% (2020) lower than the previous World Economic Outlook Projections from July 2019. The subtitle of the IMF report says it all: “Global Manufacturing Downturn, Rising Trade Barriers”. So, where does this leave the tanker market in 2020? Was the recent rate spike an aberration or do we expect increased volatility and higher rates to last into the next year?
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