IEA: Demand may fall in case Brent crude exceeds $70 a barrel

Exceeding oil prices $70 a barrel increases risks of decline in demand, International Energy Agency (IEA) said in a statement for April, Report informs.

"Clearly, oil prices at $70/bbl for Brent, are less comfortable for consumers than they were at the start of the year and the IEA has regularly warned of the dangers of prices rising even higher. Only time will tell if our current demand forecast proves accurate, but the risks are currently to the downside," the report said.

"Although the main sources of growth are doing well, there are mixed signals from elsewhere. Overall demand in the OECD countries fell by 0.3 mb/d y-o-y in 4Q18, the first such fall for any quarter since the end of 2014, and it is likely to have fallen again in 1Q19 due to weakness in some European economies, with perhaps more to come if there is a disorderly Brexit.

"There are uncertainties in Argentina and Turkey and signs of only modest demand recovery in the Middle East despite the stimulus provided by rising crude oil prices. Concerns about trade talks linger, and the mood will be influenced by the recent downgrade to global GDP growth by the International Monetary Fund, although it should be noted that the IMF does not expect a recession in the near term. Clearly, oil prices at $70/bbl for Brent, are less comfortable for consumers than they were at the start of the year and the IEA has regularly warned of the dangers of prices rising even higher. Only time will tell if our current demand forecast proves accurate, but the risks are currently to the downside.

"At the same time, growth rate of supply in non-OPEC countries declined. So, the daily growth may fall by more than 1 million barrels to 1.7 million barrels. In the second half of 2018, the daily production in non-OPEC countries increased by 3.4 million barrels, while the growth dropped down to 2.4 million barrels in the first quarter of 2019 with the United States accounting for 92%. Compared to the fourth quarter of 2018, the daily growth rate dropped only 185,000 barrels."

The IEA experts believe that the growth rate will continue to fall due to stagnation in drilling works in early 2019 and descend in investments. IEA keeps its forecast on demand growth for 2019 at 1.4 million barrels.