OPEC Secretary General Mohammed Barkindo is largely optimistic over prospects of achieving a balanced oil market in 2019. But if one thing keeps him awake at night, it’s the U.S.-China trade war’s potential to disrupt growth in major Asian markets that import the highest proportion of the world’s crude.
“We are concerned with the lingering trade disputes,” Barkindo told CNBC’s Hadley Gamble while at the Atlantic Council Global Energy Forum in Abu Dhabi Sunday. “The synchronized growth that we have witnessed since the last global financial crisis that has taken this long was also due largely to the growth in international trade.”
“Any measures that may impact or constrain trade may likely impact on growth and by extension on demand for energy. At the moment, outside the U.S., China and India remain the brightest spots in terms of demand for energy. So you can imagine our concern of the lingering negotiations.”
China is the world’s largest importer of crude, and its purchases constituted 18.6 percent of total crude imports in 2017. India’s booming growth is set to see it overtake China as the country with the world’s largest demand for oil by 2024, according to a recent report by energy consultancy Wood Mackenzie. But if a trade war severely hit China’s growth, it would send shockwaves through the rest of Asia and threaten crucial sources of income for OPEC’s producers.
Already, U.S. tariff pressure and dampened domestic demand have started to manifest themselves in China’s economic forecasts. Reuters reported last week, citing sources with knowledge of China’s economic policy, that the country is planning to set a lower growth target of 6 percent to 6.5 percent in 2019, compared with last year’s target of “around” 6.5 percent.
Three days of trade talks between President Donald Trump administration officials and their Chinese counterparts in Beijing wrapped up last week, resulting in improved sentiment across Asian markets on increased hopes of a deal. Tensions between the world’s two largest economies escalated last year, putting global stock markets on edge. The U.S. announced tariffs on $250 billion worth of Chinese goods, while Beijing countered with its own.
At the end of last year, the Asian Development Bank said that developing Asia would meet its growth forecasts for 2019, but warned of the downside risks from rising trade protectionism. Despite the worries, Barkindo struck a hopeful tone.
“We remain cautiously optimistic that they’ll be able to overcome some of the difficulties, on the premise that both the U.S. and China want these issues resolved,” he said.
—Reuters and CNBC’s Everett Rosenfeld contributed to this report.