Oil field workers tend to a pump jack.
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The International Energy Agency (IEA) cut its global oil demand growth forecasts for this year and next on Friday, citing fears of an economic downturn as the U.S.–China trade war casts a shadow over markets.
The energy agency now expects oil demand growth to reach 1.1 million barrels per day (b/d) in 2019 and 1.3 million b/d in 2020.
That constitutes a downward revision of 100,000 b/d for this year and 50,000 b/d for next year.
In its closely-watched monthly oil report, the IEA said there was “growing evidence of an economic slowdown” with many large economies reporting weak gross domestic product (GDP) growth in the first half of the year.
From January to May, oil demand rose by 520,000 b/d, marking the lowest rise in that period since the financial crisis in 2008.
“The situation is becoming even more uncertain,” the IEA said, before describing global oil demand growth in the first half of the year as “very sluggish.”
“Meanwhile, the prospects for a political agreement between China and the United States on trade have worsened. This could lead to reduced trade activity and less oil demand growth.”
Looking ahead, the IEA said the outlook for oil demand growth is “fragile,” with a greater likelihood of a downward revision than an upward one.
The Paris-based energy agency said its revisions to oil demand growth followed the International Monetary Fund’s (IMF) recent downgrading of the economic outlook.
The Washington D.C.-based institute said last month that it expects the global economy to expand by 3.2% in 2019. The revised economic growth figure is 0.1 percentage point lower than the IMF had forecast in April and 0.3 percentage points below the fund’s growth estimate at the start of the year.
The IMF also revised global economic growth down to 3.5% in 2020, down 0.1 percentage point from its previous projection.
Oil prices collapse
The IEA’s latest oil report comes shortly after a flare-up in trade tensions between the world’s two largest economies.
Global financial markets have been rocked over the past week, after President Donald Trump vowed to impose 10% tariffs on $300 billion worth of Chinese imports starting in September.
The tariff threat prompted a fall in the Chinese yuan and sparked fears of a global currency war.
The raging trade dispute between Washington and Beijing also sent oil prices plunging earlier this week, with international benchmark Brent crude dropping to a seven-month low on Wednesday.
Brent traded at $57.48 Friday morning, up almost 0.2%, while U.S. West Texas Intermediate (WTI) stood at $52.64, around 0.1% higher.
Both contracts have fallen more than 20% from peaks reached in April, Reuters reported, putting them in bear territory.
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