THE Japanese owned vessel The Kokuka Courageous and the Norwegian-owned Front Altair were struck by explosions while sailing through The Gulf of Oman, just outside the Strait of Hormuz, on Thursday. Some 20 per cent of the globally traded oil passes through the narrow strip.
Yutaka Katada, president of the Japanese company that owns The Kokuka Courageous, said the vessel was hit by two “flying objects”. The US beating the war drums released a video suggesting the vessel had been mined, blaming the attacks squarely at Tehran’s door, with US President Donald Trump saying the incident had Iran “written all over it”. With the US-Iran war theatre heating up, this was the second such incident in two months. Had these incidents taken place in normal times, markets could have gone haywire by this time and spikes would have been very visible.
Not this time. We are living in different times. Yes oil markets rebounded from the five-month low after the attacks, over worries about supplies from the Middle East, climbing by more than 2pc on Thursday. Yet by Friday oil futures had suffered a loss for the week, tempered by concerns over weak global demand and rising US inventories.
With US-China trade tensions continuing to feed expectations for a slowdown in energy demand. The International Energy Agency (IEA) in a report on Friday cut its global oil demand growth forecast and said there’s “plentiful’ supply to meet that growth”.
In its closely watched oil-market report, the Paris-based IEA, the OECD energy watchdog, downgraded its 2019 forecast for global oil demand for a second straight month, citing in part a global economic slowdown. The agency cut its oil demand growth forecast to 1.2 million barrels per day (bpd) from 1.3m bpd the previous month. “Meeting the expected demand growth is unlikely to be a problem,” the IEA said. “Plentiful supply will be available from non-Opec countries,” with the US contributing 90 per cent of this year’s 1.9m bpd increase in supply.
The Organisation of the Petroleum Exporting Countries (Opec) had also cut its forecast for growth in world oil demand this year. The US Energy Information Administration (EIA) too agreed, underlining; 2019 global crude demand would be lower than previously expected. In its Short-Term Energy Outlook, it lowered its demand estimate to 1.2m bpd, nearly 200,000 bpd lower than last month’s projection.
Wall Street banks appear even more pessimistic. Morgan Stanley sees demand growing by 1m bpd while JPMorgan Chase puts growth at 800,000 bpd for 2019.
The EIA last week also reported a second straight weekly climb in US crude inventories by 2.2m bpd, indicating a weakening consumption in the country — the world’s largest crude consumer.
Published in Dawn, June 16th, 2019