Economic Headwinds
In early April, the OPEC+ coalition made a surprise decision to implement fresh production cuts, with concerns over the global economy and banking crisis being cited as one of the reasons behind the cut. Oil prices rallied as a result but in more recent weeks these gains have been erased. On the global economic front, there indeed have been some troubling indications, most notably in OECD countries. Europe’s GDP growth remained more or less flat in Q1 2023, up by just 0.1% compared to the previous quarter. The region’s manufacturing PMI, a key indicator of industrial activity, was assessed at 45.8 in April, showing the sharpest contraction since May 2020. Meanwhile, forward expectations for Europe’s industrial powerhouse Germany continue to wane. The ZEW institute’s indicator of economic sentiment declined to minus 10.7 in May, its first sub-zero reading this year. The weakness in economic indicators is filtering through oil consumption, with OECD Europe’s oil demand in 1Q 2023 down by 200 kbd, of which Germany accounted for just over half of the overall decline, according to the IEA.
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