BAKU, Azerbaijan, Aug.3. From the oil demand perspective, developments in China have been particularly impactful, Trend reports with reference to Fitch Solutions.
“The government’s continuing adherence to its zero Covid-19 strategy, coupled with a steep resurgence of the virus this year, has led it to impose sweeping and stringent lockdowns that have severely curbed economic activity and energy consumption. In response, we have significantly downgraded our demand expectations and now forecast growth of just 1.6 percent this year, down from 4.5 percent previously. This is in line with shifts in our macro outlook on the market, with our economists downwardly revising their 2022 real GDP growth forecast to 3.6 percent, down from 5.4 percent at the start of the year,” reads the latest report released by Fitch Solutions.
The company analysts note that although the economy is expected to recover over H2, renewed outbreaks of the coronavirus, extended containment measures, adverse weather conditions and ongoing cost pressures will continue to drag on growth in the near term.
“This is significantly undercutting oil consumption, with China now set to contribute just 12 percent to global growth this year, compared to 29 percent in the next. Our current forecast is for global oil demand to rise by 2.0% in 2022 and 3.0% in 2023, down from 4.1% in 2021. However, the risks to this outlook lie largely to the downside. The US entered into a technical recession in H1, leading us to revise down our annual average real GDP growth forecast from 2.4% and 1.6% for 2022 and from 1.8% to 1.6% for 2023. However, there remains a non-negligible risk (around 30-40%) that the US Federal Reserves tightens monetary policy too aggressively, tipping the economy into a deeper and more sustained recession. Recession risks for the EU are even higher, at around 45-50%, with growth under pressure from acute fuel and power price increases and at risk from falling future energy flows from Russia, especially over winter. While our core view is for growth to remain positive (at 2.7% and 1.3%, respectively, this year and next), the EU, US and China combined account for 50% of global oil demand and any further substantial deceleration in their economies could weigh heavily on growth, loosening the market."
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