LONDON- Oil prices have tumbled by around a quarter in the past three months, largely due to fears of a prolonged slump in global energy demand. But no major forecaster is actually predicting one.
Two of the most closely followed predictors of global oil demand, the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) – the West’s energy watchdog – see it growing by between 2 percent and 3 percent this year and next.
That’s nearly double the yearly average in the decade before the Covid-19 pandemic struck in 2020, when annual growth in global oil consumption averaged 1.2 million barrels per day (bpd).
Despite economic storm clouds from Beijing to Washington, neither forecaster expects the post-pandemic rebound in oil consumption to be significantly marred by a possible recession.
“We are still optimistic,” OPEC’s new Secretary General Haitham Al Ghais told Reuters last month. “In 2023, there will be a slowdown in growth but it will not be something that we currently anticipate to be lower than historical norms.”
Generally bullish, the group of 13 oil exporting nations predicts an increase in demand of 3.1 million bdp this year and 2.7 million next year.
The IEA – which acknowledged this week that demand growth would stall in the final three months of this year – still expects a 2 million bpd rise in oil consumption overall in 2022, to be followed by 2.1 million in 2023.
And major Wall Street banks are striking a similar tone. Investment bank Goldman Sachs forecast in August that demand would rise next year by 2 million barrels – despite the signs of an economic slowdown from China, to Europe and the United States.
JP Morgan, meanwhile, reaffirmed this week that growth in oil demand would remain resilient, citing “our expectation that the global economy will stay out of recession”.
In oil markets, the mood has been darker. Pushed briefly to near $140 per barrel in March by Russia’s invasion of Ukraine, prices have suffered the biggest 90-day fall since the start of the Covid pandemic – and, before that, the major plunges of 2014-15 and 2008-09.
For Swiss asset manager Julius Baer – whose view that the price of benchmark Brent crude oil will average $95 this year is among the most bearish – the equation is simple: supply is outstripping demand.
“We still see demand growth, mainly in emerging markets, but we also see stagnant demand in the Western World and China”, said Norbert Rucker, Julius Baer’s head of economics.
In addition to strict Covid-19 curbs in many Chinese cities that have slowed economic activity, oil demand there has been undercut recently by temporary refinery maintenance, industry experts note.
