For the first time since the referendum of June 2016, Paris-based autonomous International Energy Agency (IEA) has warned that the UK’s exit from the European Union and trade disputes between major powers could hit global energy demand.
Essentially, consumption of oil depends on the strength of the world economy and IEA said uncertainty stemming from trade rows as well as concerns about a mismanaged Brexit were major factors that might alter consumption patterns.
“Ongoing trade disputes between major powers and a disorderly Brexit could lead to a reduction in the rate of growth of international trade and oil demand,” the Paris-based intergovernmental organisation said on Monday.
Although IEA admitted that the economic mood was not encouraging, it, however, expects “oil demand to grow in our forecast, although at a more measured pace”.
IEA noted that a key factor underpinning demand growth is that leading developing economies will continue to expand as China and India are expected to account for 44 percent of 7.1 mb/d growth in global demand expected by 2024.
Also, IEA said the US will export more oil than Russia, reaching 9 mbd which will also unseat Saudi Arabia as the world’s top exporter by 2024.
“The transformation of the United States into a major exporter is another consequence of its shale revolution,” IEA said.
The forecast from IEA comes just weeks after the US exported a record 3.6 million barrels per day of crude oil. The country also exports about 5 million bpd of petroleum products, including refined fuels like gasoline.
The US topped the Saudis and Russians to become the world’s biggest oil producer in 2018. Pulling ahead of them in the export market would further erode their influence in the oil market.
Saudi Arabia and Russia have formed an alliance in recent years, coordinating oil production among OPEC and other oil producing countries. The so-called OPEC+ alliance has capped output for much of the last two years, helping to boost oil prices after a punishing downturn.
IEA in its report released on Monday said buyers of crude oil, particularly in Asia, where demand is growing fastest, have a wider choice of suppliers which will also give them more operational and trading flexibility, reducing their reliance on traditional, long-term supply contracts.
IEA noted that global trade is not simply a story for the US, acknowledging that the second-largest increase in crude exports comes from Brazil, which will ship an extra 0.8 mb/d of oil by 2024.
“Following Brazil, Norway is enjoying a renaissance and will overtake Kazakhstan and Kuwait in the next five years, a remarkable achievement,” it said.
Around the world, more consumer demand means more plastic, which in turn means more petrochemicals. IEA said despite efforts to curb plastics use and encourage recycling, demand for plastics and petrochemicals is growing strongly led by the United States and China.
It identified more than 50 major projects due to come on-stream through 2024 which are expected to add 2.2 mbd in oil consumption over the forecast period, accounting for 30 percent of global growth.
“While the lack of complete visibility on new projects causes our estimate to fall towards the end of the forecast period, it is highly possible that more projects will be announced and that demand could be higher than currently anticipated,” IEA said.
The other major growth sector is aviation. IEA said demand will continue to grow strongly, supported by rising incomes in developing countries, more airports being built and growing airline fleets with Asia expected to accounts for 75 percent of this increase over the forecast period.
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