Global Markets: “Oil Demand Faces Mounting Risks” – Analysts

Oil demand faces mounting risks as escalating global trade tensions begin to drag on global trade and economic activity.

That’s the view of oil and gas analysts at BMI Research, who said they forecast “a small slowdown in oil demand growth in 2019”, in a report sent to Rigzone.

“Trade tensions are mounting globally, catalyzed by the increasing protectionism of US trade policy. Tensions are most acute between the US and China, with the US imposing tariffs on $34 billion of Chinese goods and China responding in kind,” the analysts said in the report.

“US President Trump is now targeting an additional $200 billion worth of tariffs, which would mark a significant deterioration of trade relations between the two. Given their importance in the global economy, the ripple effects would be substantial. There are already signs that global trade growth has begun to slow,” the analysts added.

BMI said slowing trade growth will weigh on physical demand for oil, “with the shipping, road and air freight sectors an important pillar of demand globally”.

The report highlighted that despite US-China trade “tensions”, the economic outlook is “broadly positive” but warned that “a number of headwinds are emerging”.

“Not least a stronger dollar, rising inflationary pressures and tightening liquidity,” the analysts said.

“This could harm demand from the industrial sector also, further pressing on global growth,” the analysts added.

Much of the strength in oil demand in recent years has stemmed from developed rather than emerging markets, according to BMI.

“This has been due both to a slowdown in EM [emerging market] demand and a pick up among a number of key DMs [developed markets], largely the US,” BMI analysts said.