Where to Look in the Oil Market for Clues of a Demand Slowdown? By Ellen Milligan and Alex Longley (Bloomberg) — this is supposed to be a year of bumper oil demand, but economic warning signs are flashing across the developing nations that drive growth. Emerging markets are expected to contribute 1 million barrels a day of additional oil demand this year, about three quarters of total global growth, according to the International Energy Agency. Many of those countries are also the epicenters of recent economic tumult — China’s trade war with the U.S., currency crises in Turkey and Argentina, and the threat of contagion in Indonesia. So if the global economic turmoil continues, what are the most important corners of the oil market to watch for signs that demand is taking real a hit?
If you want to know how much stuff is being moved around the world, shipping rates are as good a guide as any. Whether for oil tankers or bulk ships, any slump in those markers would offer a strong signal of potential trouble. “It would send signals about shipping activity which correlates with goods trade, an important part of the global economy,” Pedersen said. Further reading Commodities Take Global Hit as Turkey, China Form Toxic Combo Threat of Contagion in Emerging Markets Deepens Commodity Risk What Raw Materials Oil Market Can Tell Us about Trade War’s Bite: QuickTake. Crosschecking price moves in the oil market with other commodities also offers a useful outlook on the state of the global economy. This week, base metals including copper and zinc have also been sinking on concerns about slowing demand growth, outstripping the fall in crude. On days when crude prices are tumbling in tandem with the entire commodities complex, it could be “a sign of negative sentiment in financial markets including the oil market about the global economy,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S.