Global oil demand is not declining in a pattern that would be consistent with a recession, and demand will still grow next year from this year despite expected slowdowns in Europe and the United States, Amrita Sen, director of research at Energy Aspects, told Bloomberg on Friday.
There is still a lot of pent-up demand following the reopening after COVID lockdowns, and people generally still have a lot of savings, Sen said.
Energy Aspects’ research director was discussing fears of a recession and the oil market a day after the advance estimate from the U.S. Department of Commerce showed that GDP contracted by 0.9% in the second quarter, following a 1.6% decline in Q1. In theory, the GDP data met one common definition of a recession—two consecutive quarters of GDP contraction.
Yet, U.S. policymakers insist the ‘technical’ recession is not a broad-based recession because many areas in the economy are still going strong, especially the labor market.
The oil market should also look at conditions in the U.S. labor market for clues about recession and demand, and the labor market is tight right now, Sen said on “Bloomberg Surveillance Early Edition.”
“The economy is slowing down but that doesn’t mean we are going into a 2008/09-style recession,” she added.
This time the slowdown or a recession will be very different from the major recession brought about by the credit crisis in 2008. It would be more like the recession of 2001 or in the early 1990s, Sen said, noting that global oil demand continued to grow in those periods.
Turning to the supply side of the market, Energy Aspects expects a “very small increase” from the OPEC+ group when they meet next week, Sen said.
“They are all going to add a little bit given how tight the market is,” she added. “The reality is very few of these countries even have spare capacity.”
“This is a structurally bullish market, and unless demand actually declines outright, there just isn’t enough supply,” Sen said.
Moreover, the market right now “is completely missing” the fact that the massive SPR releases will stop in October, she noted.
By Tsvetana Paraskova for Oilprice.com
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