The International Energy Agency (IEA) cut its forecast for global oil demand citing the of slower economic growth and concerns over a U.S.-China trade war.
“The main focus I think we should be looking at here is that until very recently the geopolitical factors related to Iran and Venezuela and Libya… they were at the forefront of people’s minds,” Neil Atkinson, head of the oil industry and markets division at the IEA, said in an interview with CNBC.
“Now we are starting to see that confidence in demand is taking over and that is the main driving factor behind the current state of the oil market,” he said.
The IEA forecast global oil demand of 1.2 million barrels a day, down from 1.3 million barrels per day a month ago, citing a warm winter in Japan, a slowdown in the European petrochemicals industry, and weak demand for fuel in the U.S. It was the second consecutive month the agency has cut its forecast.
The report comes as OPEC and its allies mull an extension of a six-month deal to reduce output. On Thursday, OPEC reported its own oil production fell by 236,000 to about 29.9 million barrels per day in May, the lowest level since June 2014.
“Throughout the first half of this year, ongoing global trade tensions have escalated, threatening to spill over, and geopolitical risks remained in many key regions,” OPEC said. “This has resulted in a slowdown in global economic activities, and weaker growth in global oil demand, both compared to a year earlier.”
OPEC said it expects global demand for oil to increase by 1.14 million barrels per day in 2019, but it expects producers from outside the bloc to increase output by 2.14 million barrels per day.
Crude futures have fallen more than 15% since the start of April.
They rose 45% in the first four months of the year.