Oil Demands Decline Indicates Global Economic Growth Slow

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Energy Aspects, a consulting company in London claims that the substantial decline of oil demands is a leading indicator that global economic growth slows down. The new GDP published by Europe and Japan also proves that.

For the weak demands of European and Asian oil refineries and the falling risks of geopolitics felt by market, as the standard of global oil price, Brent oil price has fallen by 12% compared with the highest level in the mid of June. Energy Aspects shows that it is still far from stimulating more demands of drivers and other consumers although Brent oil price has reduced to 101 dollars per barrel, the lowest price in 14 months.

Energy Aspects claims that the whole weakness of global oil price indicates that the demands do not still recover. So it is doubted whether global economy and stock market will suddenly descend in the late of this year.
Contango means that traders buy up in short-tern contacts at low price due to sufficient oil supply.

On Monday, OQD in DME also had contango. Brent oil is the indicator of tendency in European oil market. Contango in OQD makes clear that oil supply in Asian market is quite sufficient.

However, the connection between global economic growth and oil price needs to be focused. Geopolitical crisis which threatens the output of oil in Iraq, Russia and other oil producing countries may promote oil price to rise up again. Oil demands generally falls when oil refineries are carrying out seasonal maintenance in late summer and early autumn. For that, the impact on global economic growth cannot be shown up by oil price immediately.

But Energy Aspects said that the demands for gasoline, diesel and other product oil may become the important index of economic growth. It is still unclear that the tendency on oil market means that global economy declines seriously while it can still predict some situations of global economy which have not been reflected yet.