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IEA Again Slashes Its Oil Demand Growth Estimate

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Oil’s fall impacts CRZO and WLL

Following a supply shock, US crude oil July futures rose 2.2% yesterday from their lowest closing level since January 14 and settled at $52.28 per barrel. In the last week, US crude oil active futures have fallen 0.6%, and several oil-weighted stock prices have stayed the same. Carrizo Oil & Gas (CRZO) and Whiting Petroleum (WLL), the weakest oil-weighted stocks, fell 6.4% and 7.1%. The United States Oil ETF (USO), which holds active US crude oil futures, has fallen 1.8% in the last week.

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Oil heading for a loss

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they’ll mark their third week of decline in five weeks.

Oil demand growth estimate slashed

The IEA (International Energy Agency) slashed its 2019 oil demand growth estimate by 0.1 MMbpd (million barrels per day) to 1.2 MMbpd. In 2020, it expects oil demand growth to rise to 1.4 MMbpd.

On May 23, the IEA slashed its oil demand growth estimate for the first quarter by 400 Mbpd (thousand barrels per day), and reduced its demand growth forecast for the next three quarters by 100 Mbpd—the biggest cause of oil prices falling since late May.

The IEA’s trimmed demand growth estimate could impact OPEC’s output cut agreement, forcing OPEC and its allies to deepen their production cut. In the first six months of 2019, OPEC cut production by 1.2 MMbpd. Last month, OPEC oil output was near lows seen in June 2014.

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