‘Disorderly Brexit’ and trade spats would hit oil demand
A “disorderly Brexit” could hit crude oil demand, the International Energy Agency said, marking the first warning from the body about how the UK’s exit from the EU could reverberate across global energy markets. Consumption of oil depends on the strength of the world economy and the IEA said uncertainty stemming from trade spats as well as concerns about an ill managed Brexit were major factors dictating consumption patterns, Financial Times writes in the article ‘Disorderly Brexit’ and trade spats would hit oil demand, IEA warns.
“Ongoing trade disputes between major powers and a disorderly Brexit could lead to a reduction in the rate of growth of international trade and oil demand,” the Paris-based intergovernmental organisation said on Monday. These factors could amplify the slowdown in demand growth between 2019 and 2024 that the IEA expects, largely led by a slowdown in Chinese consumption. “The economic mood is not encouraging,” it added. “Confidence in the health of the world economy has deteriorated,” the IEA said, in its closely watched annual report that forecasts the outlook for oil for the coming five years. “Tighter financial conditions, rising trade tensions, slowing Chinese growth and a deceleration in global industrial activity have damped optimism,” the autonomous agency said.
Still, even as the rate of consumption moderates there “is no peak in sight” for absolute demand, the IEA said. Total oil demand will increase from 100.6m b/d in 2019 to 106.4m b/d in 2024. Jet fuel, as a growing number of people around the world travel by air, and petrochemicals, which are used in plastics, will keep oil demand robust, the IEA said. When the consumption of oil may begin to structurally weaken is a subject of endless fascination for the energy industry, amid a global push towards cleaner fuels in order to reduce greenhouse gas emissions.
Still, as demand remains robust, the IEA has called -yet again — for raising investment into traditional, conventional oil and gas projects, despite production from US shale fields growing at an unprecedented level. The US will account for two-thirds of the increase in global production capacity until 2024, adding 4m b/d, the IEA said. It will also become a net exporter of oil by 2021. “While US production growth has exceeded expectations, we cannot be complacent about investment.