Global oil demand is expected to grow by 1.5 million barrels per day (bpd) this year and 1.4 million bpd in 2019, Bank of America Merrill Lynch (BofAML) said in a report on Monday.
The bank, however, also noted the growing risks to consumption arising from higher US interest rates and political turmoil in Europe.
Rising crude oil prices could also impact the global demand outlook, if key emerging market governments are unable to mitigate the rise in local prices, it added.
“Our demand estimates would drop by 200,000 bpd if Brent crude prices averaged $80/bbl this year rather than $70/bbl as we expect,” BofAML said.
Brent crude prices have edged lower in the recent days, after hitting of $80 per barrel (bbl) on May 17.
The decline is mainly driven by reports that Saudi Arabia and Russia – the two main participants in the output cut deal implemented last year – may consider increasing production to check rapid escalation in prices and any subsequent impact on global oil demand, the report said.
“Oil demand growth leaders are mostly emerging markets and tend to be price elastic. Yet subsidies and pegs are making a come-back, adding demand rigidities to the oil market,” BofAML said.
“For instance, the upcoming elections in India are encouraging the government to intervene in retail fuel markets again, while a truckers strike in Brazil has led to a temporary cap on diesel prices,” it added.
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