Market Concerns about Global Growth Overstated

By Divya Chowdhury
MUMBAI (Reuters) – Market concerns about global growth may have been excessive this week as there is no evidence of an imminent U.S. recession, said Amrita Sen, co-founder of consultancy Energy Aspects, on Friday.

“Overall, we do not believe the global economy is on the verge of a sudden downshift,” Sen stated, referring to disappointing Chinese growth and signs of a U.S. slowdown that have made policymakers hesitant in both nations.

Sen remarked, “I don’t think what we saw on Monday is a one-off,” referring to the severe sell-off triggered by an unwinding of yen-funded trades. “We will likely get a few more rounds of macro meltdowns, but oil’s own fundamentals are stable.”

Global shares extended gains on Friday, recovering nearly all losses from this week’s downturn. Brent prices are on track for a weekly gain of over 3%, having started the week more than 18% down from April highs.

Energy Aspects forecasts a growth in 2024 oil demand by 1 million barrels per day (bpd) compared to last year, a rate similar to previous years during global slowdowns.

In the short-term, the focus will remain on demand, which, according to Sen, will not come “roaring back” due to the weak Chinese economy.

By 2025, crude supply from non-OPEC countries is set to increase by 1.4 million bpd year-on-year, while demand is expected to rise by 1.2 million bpd. Sen noted that if non-OPEC supply disappoints, the stockpile would be sufficient to cover it.

“OPEC may choose to delay bringing back the barrels they have outlined, but in either case, it is a balanced market with ample spare capacity,” she concluded.

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