Oil prices fell once again on Wednesday, falling to mark the oil demand and growing fear of an economic downturn.
EIA reported another leap in petroleum inventories last week with $ 2.2 million. Barrels, which helped to worsen the seller. A number of inventory gains have raised fears of weak demand at a time when other economic indicators are flashing red.
Demand is greatly weakened due to deceleration in the world economy. Weak indicators continue to emerge from China and Europe as well as in the US. As John Kemp points out for Reuters, major trading hubs around the world show a sharp slowdown in global trade, with freight volumes declining significantly compared to last year, suggesting that the global economy is heading for a recession.
"Demand The outlook for 201
The deterioration of the demand for oil is finally recognized by large oil predictors. The EIA said on Tuesday that global global demand in 2019 would be lower than expected. In the Agency's short-term Energy Outlook, it lowered the demand estimate to 1.2 million barrels per year. Day (mb / d), nearly 200,000 bpd lower than last month's projection. "The lower 2019 Brent CPM price path reflects increasing uncertainty about global demand growth," the agency said, arguing for a $ 3 downgrade. Barrel. Meanwhile, US slate 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 the demand grow by 1 million barrels a day (mb / d). JPMorgan Chase puts the 800,000 bpd growth in 2019, nearly 40 percent lower than the IEA's 1.3 mb / d estimate.
Still, the economic downturn significantly increases the odds of expanding the OPEC + cuts, which could prevent a deeper glide in oil prices. "Extending the production cutoff agreement by another six months should prevent over-supply in the oil market and support price improvement 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 per dollar. Barrel, though it does not seem inconceivable that the group would refrain from expanding production cuts. "A scenario when they do not extend cuts will not be beautiful," says Warren Patterson, trading strategist at ING, the Wall Street Journal. Related: Escalating Trade War Signals More Pain For Oil
For the most part, Goldman Sachs analysts most likely see an expansion, with the main OPEC + members (ie, Saudi Arabia) balancing the market every month basis forward – ramp production up or down depending on what the market needs. This would indicate that the group is far in maintaining a balance between supply and demand. Goldman is stuck with a $ 65.50 forecast. Barrel for the third quarter.
However, the Investment Bank acknowledged that a sharp slowdown in demand would throw this scenario out of the window. OPEC could not cut fast enough to stop the fall 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, accounts, and lower prices," Goldman analysts wrote before adding that such a result still seems unlikely.
But worrying, Trump administration is continuing the trade war with China, which could still escalate into a new phase. Earlier this week, Trump said he could raise 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 tax or "much higher than 25 percent."
By Nick Cunningham from Oilprice.com
Several top readers from Oilprice.com: