Petchems to drive 2020 oil demand as global trade slowdown bottoms out – OPEC

LONDON (ICIS)–The global slowdown on trade and has bottomed out and industrial production is likely to rebound, with the petrochemicals and transport sectors expected to continue to drive oil demand growth next year, OPEC said on Wednesday.

Trade pressure has started to ease and progress on key regional trade agreements such as the Economic Partnership of Asian-Pacific nations is likely to add momentum to the recovery in some parts of the world, despite a lack of resolution to the US-China trade talks at present.

OPEC left its GDP, global demand and non-OPEC supply growth projections unchanged month on month in its December oil market report, with the global economy projected to expand 3% in 2019 and 2020.

Global oil demand is expected to stand at 0.98m bbl/day for 2019, growing to 1.08m bbl/day in 2020, largely driven by demand from developing economies.

Non-OPEC supply growth for 2019 is expected to be 1.82m bbl/day, ticking up to 2.17m bbl/day in 2020, as increased projections of UK supply growth offset downward revisions to Russian output.

Supply has exceeded demand this year in oil markets despite continued production cuts among OPEC and certain key non-OPEC players and the economic crisis in Venezuela, as weak economic growth throttled demand and strong US output stymied attempts to balance the market.

Late last week OPEC announced that it had agreed to continue and intensify cuts from the start of 2020, adding an additional 500,000 bbl/day to the 1.2m bbl/day of existing cuts.

“[The] significant and successful effort of countries participating in the Declaration of Cooperation (DoC) have helped the global oil market to remain relatively balanced in 2019,” the cartel said in its monthly oil report.

“This is to stabilise the market in the interests of both consumers and producers, as well as the well-being of the global economy,” OPEC added.

Supply growth from non-OPEC countries for the year is significantly below earlier OPEC projections, with OPEC originally forecasting 2.1m bbl/day from the region this year in its July 2018 projections. Continued strong growth from the US shale oil sector was offset by weaker than expected output in Canada, Brazil, Norway, Kazakhstan, China and Russia.

Despite the agreement of the Asia Pacific trade deal and the conclusion of talks this week on the United States-Mexico-Canada Agreement (USMCA), US President Donald Trump said earlier in the month that he would be happy for the trade dispute with China to continue until after the US 2020 elections.

The Us has also recently readied tariffs on French luxury goods, held tariffs on aerospace major Airbus, and reintroduced tariffs on steel from Brazil and Argentina, all of which could have cooling effects on global trade.

A significant tranche of new tariffs covering $300bn of Chinese goods, initially set to be introduced in September and moved to December, may be set to come into effect this weekend, which could add more pressure to the global recovery.

Thumbnail picture source: Photo by Ronald Zak/AP/Shutterstock

(Clarification: recasts initial planned onset date of latest US tariffs on China in closing paragraph)