SINGAPORE (Reuters) - Oil executives and traders attending major industry gatherings in Singapore and Abu Dhabi this week have flagged deteriorating demand growth in key markets such as China and India for the rise of downbeat expectations for crude oil heading into 2020.
A raft of disappointing data releases across key economies, including historically weak car sales in China and India and a contraction in China's factory activity, have helped to fuel the gloomy tone.
Benchmark crude oil prices (LCOc1) have shed about $10 a barrel since April to just under $63 as the global economic malaise has set in. On Tuesday, the U.S. Energy Information Administration (EIA) forecast that Brent would average $60 a barrel in the fourth quarter.
"The flat price had the best it's going have this year. We're bearish until year-end," said Ben Luckock, co-head of oil at trading house Trafigura at the Asia Pacific Petroleum Conference in Singapore this week.
(Graphic: Car sales across key Asian economies link: https://fingfx.thomsonreuters.com/gfx/ce/7/6393/6375/AsiaCarSales.png)
That bearish outlook echoed similar sentiments from earlier in the week at the World Energy Congress in Abu Dhabi.
"There are signals from our consuming markets that our industry should prepare for slower GDP growth. And hence it will translate into tougher days," Rainer Seele, chief executive of Austrian energy group OMV (VI:OMVV), told Reuters at the conference.
China's latest batch of factory data were emblematic of the broader economic concerns, with factory-gate prices shrinking last month at their fastest in three years as the trade war with the United States weighed heavily on its manufacturing sector.
(Graphic: GDP growth vs the year before across key Asian economies link: https://fingfx.thomsonreuters.com/gfx/ce/7/6394/6376/AsiaGDP.png)
Energy consultancy Wood Mackenzie cut its global energy liquids demand growth forecast to 700,000 barrels a day (bpd) for 2019, down from 850,000-900,000 bpd, due to stiffening economic headwinds related to the U.S.-China trade war.
At a presentation in Singapore this week, WoodMac said weakness in China's manufacturing sector due to the trade war has restricted the country's overall fuel consumption.
The EIA also shaved its global growth forecast for 2019, to 890,000 bpd from 1 million bpd previously.
JBC Energy, an oil and gas research firm that tracks demand data from more than 100 countries, also pegged global oil demand growth at below 1 million bpd for 2019.
"There is simply no strong engine for growth in the market. Large economies are constrained by geopolitical uncertainty (Trade War/Brexit), while emerging/developing economies are dealing with this and relatively high prices," said Richard Gorry, managing director at JBC Asia in Singapore.
"We are of course also tracking the Fed fund rates, treasury rates, commodity indices, PMIs, etc, all of which support our concerns on demand," Gorry said.
ANZ economists joined the bearish chorus in a research note that cut its 2019 oil demand growth forecast to 1.0 million bpd from 1.2 million, also citing weakening purchasing managers' index (PMI) data and shrinking global car sales.
Looking ahead to 2020, though, both JBC and WoodMac forecast a modest recovery in demand growth.
"Next year we would see demand back around 1.2 million bpd, marginally IMO-driven, and partially as a base effect of low demand growth in 2018 and 2019," said Gorry, referencing new maritime rules that will force ships to upgrade their fuel.
WoodMac's 2020 growth forecast is 1.3 million bpd.