The International Energy Agency (IEA) has lowered its forecast for the demand for oil.
The chief factor that indicates a slowing demand is a slowdown in the global economy. The trade war between the U.S. and China has affected global trade which has brought a slowdown in growth across every country, says Fatih Birol, the Executive Director of the International Energy Agency on Thursday.
Fatih Birol says that the growth forecast for global oil demand has been revised to 1.1 million barrels per day for this year 2019. If there is a further weakening in the global economy, the forecast may be lowered further.
In 2018, the IEA had given a forecast of 1.5 million bpd, which was then decreased in June 2019 to 1.2 million barrels per day.
Apart from the trade war, the increasing production of shale has also led to a weakening oil market. The forecast for oil shale output from the U.S. is expected to be 1.8 million barrels per day for 2019. This forecast has been lowered from the expected volume of 2.2 million bpd that was projected in 2018.
Tension in the Middle East countries is also escalating. The Strait of Hormuz is becoming a place of contention which is witnessing many issues. This strait is an important shipping route for carrying oil cargo from the Gulf countries to other nations like Europe, Asia, North America, and other oil markets.
This region is most critical as it transports about 20 million barrels per day through the Strait of Hormuz. As tensions are rising in this region, major oil producers are looking for alternate routes to aid oil transport. Birol says that such options will help in the medium and long term.
The tension between the U.S. and China is still going on and will be the chief trigger for further movement in the oil market, as tariffs are hurting both countries.