Soaring US oil output, sluggish global demand, a visible slowdown of China’s recovery and an early resolution of the Iranian crisis could cumulatively depress oil prices, according to Qatar Financial Centre Authority’s second quarter Business Optimism Index (BOI).
Expecting that uncertainty in the global economy is likely to drag oil prices in the short term, the BOI said subdued economic growth in the current year has led the world’s top oil forecasters to cut their 2013 oil demand figures.
The International Energy Agency (IEA) reduced its forecasts for global oil demand in 2013 for a third consecutive month in April, predicting the weakest consumption in Europe in almost three decades, with demand expected to slump by 330,000 bpd (barrels per day).
Worldwide oil consumption remains supported by emerging economies such as China, where demand will increase this year by 380,000 bpd, or 3.9%, to 10mn bpd a day.
Opec has joined the EIA in lowering its 2013 oil growth forecast, citing weaker-than-expected demand in developed economies, particularly Europe and Japan, and uncertainties about the outlook for the US economy.
“A combination of soaring US oil output, sluggish global demand, a visible slowdown of China’s recovery and an early resolution of the Iranian crisis could cumulatively force down oil prices,” BOI said.
The beginning of 2013 witnessed restoration of optimism about the world economy, supported by crude oil prices; but towards the end of February, a loss of confidence in the global recovery seems to have hampered the market’s upward momentum, BOI said.
Finding that the average monthly Opec basket declined from $106.44 per barrel in March to $101.05 per barrel in April, it said “oil prices are likely to remain flat or fall during the short term as the world economic situation remains weak.”
Quoting International Monetary Fund figures, the BOI said global growth is estimated at 3.3% this year and is expected to rise to 4% next year.