Arab Press

بالشعب و للشعب
Sunday, Jul 06, 2025

Analysis: Lower oil prices defy robust forecasts for global demand

Analysis: Lower oil prices defy robust forecasts for global demand

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% and 3% 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.

Neil Crosby, senior oil analyst at consultancy OilX, noted that major forecasters like the IEA have downgraded their outlooks for oil demand slightly but that bearish investors were pricing in a much more drastic impact from the slowdown.

"Nobody is acutely wrong per se, but inevitably at some stage these two signals will have to converge and likely somewhere in the middle," Crosby told Reuters.

RECESSION RISKS?


A global recession remains possible, according to the International Monetary Fund. The United States has passed through two quarters of negative growth and Chinese growth remains hobbled by COVID-19 restrictions and a property crisis.

Fuel use in the Organisation for Economic Cooperation and Development (OECD) group of prosperous nations is expected to decline in the second half of this year, the IEA said in its monthly oil report this week.

But that will be compensated somewhat by rising demand for jet fuel for air travel and a shift toward using more oil for power generation, as Russia turns off the gas taps to European nations, the IEA said.

Demand growth this year was mostly concentrated in the first half, an IEA spokesperson told Reuters. The spokesman added that its forecast for robust demand growth next year was based partly on expectations that Covid restrictions in China will be eased and the world's second-largest economy will come bouncing back.

In another positive signal for demand, U.S. refiners including Marathon (MPC.N) and Valero (VLO.N) told investors last month they plan to run near full-throttle to replenish fuel inventories that have been drawing down to near-historic lows all year.

There are signs that some market participants may be seeking to buy the price dip, encouraged by developments such as the dimming prospect of a nuclear deal for Iran that would have returned large volumes of oil supply to international markets.

Investors lifted their net long positions in Brent crude oil futures in the last week of August to a nine-week high, exchange data show, before ebbing slightly.

"Recent geopolitical developments ... should be bullish for energy, but prices have yet to respond," JP Morgan said. "We advocate buying the dip".

Key to the oil market's outlook may be top fuel importer China, where the economy slowed in July, with factory and retail activity squeezed by Beijing's zero-COVID policy and a property crisis.

Ed Hirs, an energy economics professor at the University of Houston, said that Chinese refinery maintenance over the summer and not economic malaise could explain reduced imports and may have temporarily helped depress global prices.

"The sell-off and the price fall really relates to China not soaking up 750,000 barrels a day of crude for the last month and a half ... for an almost 0.75% drop in (global) demand, you would see the price go down by 15-20%. So that's about right."

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
AI Raises Alarms Over Long-Term Job Security
Russia Formally Recognizes Taliban Government in Afghanistan
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Mediators Edge Closer to Israel-Hamas Ceasefire Agreement
Germany Seeks Taliban Deal to Deport Afghan Migrants
Emirates Airline Expands Market Share with New $20 Million Campaign
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Trump Asserts Readiness for Further Strikes on Iran Amid Nuclear Tensions
Qatar Airways Clears Backlog of Passengers Following Missile Threats
Iran's Parliament Votes to Suspend Cooperation with Nuclear Watchdog
Trump Announces Upcoming US-Iran Meeting Amid Controversial Airstrikes
Trump Moves to Reshape Middle East Following Israel-Iran Conflict
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
“You Have 12 Hours to Flee”: Israeli Threat Campaign Targets Surviving Iranian Officials
Oman Set to Introduce Personal Income Tax, First in Gulf
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
WATCH: Israeli forces show the aftermath of a massive airstrike at Iran's Isfahan nuclear site
We have new information and breaking details to share about what is shaping up to be a historic air campaign tonight
Six Massive Bombs Dropped on Fordow; Trump: 'A Historic Moment for the U.S., Israel, and the World'
Fordow: Deeply Buried Iranian Enrichment Site in U.S.–Israel Crosshairs
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Pakistan to nominate Trump for Nobel Peace Prize.
Israel Confirms Assassination of Quds Force Commander in Tehran
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
G7 Leaders Fail to Reach Consensus on Key Global Issues
Mass exodus in Tehran as millions try to flee following Trump’s evacuation order
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Netanyahu Signals Potential Regime Change in Iran
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
Iran Conducts Ballistic Missile Launches Amid Heightened Tensions with Israel
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
UK Deploys Jets to Middle East Amid Rising Tensions
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
×