Belfast Telegraph

Demand for crude oil from Europe will drop

By Holly Williams

Global oil cartel Opec cut its forecast for world growth this year and said demand for crude from Europe would slow in the wake of last month's Brexit referendum.

The Organisation of the Petroleum Exporting Countries, which controls more than a third of the world's oil supply, warned over the impact of "economic uncertainty" following the referendum decision.

But it said the over supply glut that has sent crude prices tumbling would begin to ease in 2017.

In its monthly oil market report, Opec trimmed its forecast for world growth in 2016 to 3% from 3.1% and said the global economy would also be "impacted by the dampening effect of the UK vote".

It said: "After the UK's referendum to leave the EU, economic uncertainty has increased.

"Potential negative effects have led to a downward revision of global economic growth."

It added: "Among the numerous challenges for global economic growth in the second half of 2016 and in the coming year, the outcome of the UK's decision to leave the EU will be of great importance."

Opec's report urged the Government to begin the Brexit process swiftly, saying "the earlier this starts, the better it could be for the economy".

It is forecasting growth of 1.5% in the UK this year against 2.1% a month earlier, while it believes it will slow sharply to 0.4% in 2017.

Opec held its overall forecast of oil demand growth in 2017 "broadly unchanged" - forecasting new demand of 1.2 million barrels a day, which is the same as 2016.

But it cautioned that European oil demand "faces substantial downside risks ... as a result of uncertainties related to the region's economy, resulting from the UK referendum, among other challenges".

Oil prices have halved over the past two years, with falls fuelled by Opec's refusal to cut production in the hope that it would hit demand for rival US shale.

Brent crude has plunged from 115 US dollars a barrel in June 2014 to below 30 dollars earlier this year, although it has since bounced back to almost 50 dollars a barrel.

Despite its concerns over the Brexit referendum, Opec said the oil market would largely be resilient in 2017, adding that "market conditions will help remove overall excess oil stocks", thanks largely to growing Asian economies.

Belfast Telegraph