OPEC warns Trump’s trade policies could slow economic growth and dent oil demand
U.S. President Donald Trump's protectionist trade policies threaten to slow global economic growth and dampen oil demand, OPEC warned on Wednesday.
The potential fallout from Trump's recently announced tariffs on steel and aluminum imports is one of several headwinds the 14-nation oil cartel identified in its monthly oil market report. The others include rising interest rates and several countries reaching their growth limit.
Trump's tariffs have sparked fears of trade wars and a slowdown in international commerce, as countries around the world threaten retaliatory taxes on U.S. goods.
According to OPEC, "the most recent trade-related developments may provide challenges to the growth momentum as global trade has been an important factor contributing to the world economy."
The warning comes as OPEC forecasts growth in oil supplies from the United States and other non-OPEC countries will outstrip the increase in global oil demand in 2018.
That puts the fragile balance in the oil market at risk of tipping into oversupply and dragging crude prices lower. For more than a year, OPEC has partnered with other producers including Russia to limit output and drain a global glut that devastated oil prices beginning in 2014.
But U.S. production has surged to record levels above 10 million barrels a day in recent months, topping the output from OPEC's biggest producer, Saudi Arabia.
On Wednesday, OPEC raised its growth forecast for non-OPEC production in 2018 by 280,000 barrels a day from last month's report. The group now sees oil supplies from outside the cartel growing by 1.66 million barrels a day this year.
Meanwhile, the world's appetite for oil will increase by 1.6 million barrels a day, OPEC forecasts.
OPEC says economic growth in developing nations like China, India and Brazil remains robust. But it warns that rising U.S. interest rates could cause investors to pull capital from these countries, where foreign investment has boosted the economic activity and domestic oil demand.
Despite these concerns, OPEC remains relatively upbeat.
"Nevertheless, the current healthy momentum in the global economy, together with the efforts undertaken by the OPEC and non-OPEC oil producing countries under the Declaration of Cooperation, is supporting the rebalancing of the oil market fundamentals," it said.
Output from the 14 members fell by about 77,000 barrels a day in February, remaining relatively steady at 32.2 million barrels a day, according to independent figures cited by OPEC.
The group and other producers are keeping 1.8 million barrels per day off the market in order shrink global crude stockpiles to their five-year average. On Wednesday, OPEC said inventories were just 50 million barrels above that level.