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The world’s demand for oil is growing at the slowest rate since the financial crisis over fears of a global economic slowdown, the International Energy Agency (IEA) said.
The agency said fears about the economic impact of the US trade war with China have caused oil prices to slide despite flaring tensions in the Middle East which would typically cause markets to spike.
Oil demand growth almost halved in the first five months of the year compared with the same period last year, according to the IEA.
Its latest monthly report revealed that demand grew by just under 600,000 barrels of oil a day this year, the weakest growth since 2008 when fears over the looming global recession caused demand growth to stall.
Growth was almost solely driven by rising demand in China, where oil demand grew by 500,000 barrels a day. Meanwhile, oil demand across the OECD countries fell for the third consecutive quarter.
“There have been concerns about the health of the global economy expressed in recent [IEA reports] and shown by reduced expectations for oil demand growth. Now, the situation is becoming even more uncertain,” the IEA said.
The Paris-based group added its outlook for future oil demand growth was “fragile” and more likely to fall again than to be revised upwards.
The gloomy oil market forecasts come after global oil prices slumped this week amid rising US-China tensions, and signs the trade war may drag on.
The oil price has tumbled by over 10% in recent weeks, from around $64 (£53) a barrel at the end of July to less than $57 (£47) a barrel this week. The market is down by almost a quarter from May when oil traded at almost $75 (£62) a barrel.
The oil price slide has come despite a tense standoff between Iran and the US in the strait of Hormuz in which Iran has reportedly seized three international oil tankers, and deep oil production cuts by the Opec Organisation.
Founded in 1960, the cartel of the world’s biggest oil producers emerged as a political and economic force with the 1973-74 US oil embargo, which caused oil prices to spike. The club consists of 13 countries, with Saudi Arabia the biggest producer, followed by Iraq and Iran.
In response to the 2014-16 oil price slump, Opec partnered with Russia in December 2016 to agree a cut in production of 1.8m barrels a day. That curb, the first of its kind in 15 years, drove up the price of oil. In May 2017, the cuts were extended until the end of March 2018.
Opec‘s official members are: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela. Indonesia and Qatar’s membership has lapsed.
The Opec+ group, sometimes known as ‘Vienna Group’, adds 10 non-member nations, including Russia, Mexico and Kazakhstan. Between them these nations supply 55 percent of oil production and hold 90 percent of the planet’s oil reserves.
Saudi Arabia is leading plans to rein in oil output to avoid an oversupply in the market and further price falls.
The IEA warned that by next year, rising oil supply output from non-Opec countries is expected to grow by 2.2m barrels a day in 2020, which could cause oil prices to fall further if there is not enough demand to absorb the extra supply.
US investment bank Goldman Sachs has predicted that the US-China trade war could extend beyond the November 2020 US presidential election, as both sides toughened their stances this week.
Beijing accused the US of “deliberately destroying international order” with “unilateralism and protectionism”, just days after Washington accused China of acting as a currency manipulator.
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