New Delhi [India], May 27 (ANI): Persistently high crude oil and fuel prices may eventually weaken global demand and become the next phase of the ongoing oil shock triggered by geopolitical tensions in West Asia, according to a report by PL Capital.
The report stated that the current global energy crisis, triggered by the West Asia conflict that began on February 28, is now entering a phase where elevated prices may start reducing consumption across sectors and economies.
“What began as a supply-driven price spike can eventually evolve into a demand-led correction,” it stated.
According to the report, rising prices of crude oil, petrochemical feedstocks, intermediates and fertilisers are likely to remain elevated for longer due to the prolonged uncertainty surrounding the conflict and continued supply disruptions.
However, the report noted that oil markets historically tend to be self-correcting when prices rise too rapidly and remain elevated for a prolonged period.
It highlighted that global oil demand expectations have weakened sharply. The demand projections for 2026 have shifted from an earlier expected growth of 730 kbpd (Thousand Barrels Per Day) to a contraction of 420 kbpd, representing a downgrade of 1.3 million barrels per day compared to pre-war forecasts.
The report said the steepest weakness is expected during April-June 2026, with sectors such as aviation and petrochemicals likely to witness the sharpest decline in demand.
Initially, demand remained supported through panic buying, release of strategic reserves and government subsidies across several developing economies.
However, the report said these support measures are becoming increasingly difficult to sustain as households and industries continue to face higher fuel costs.
It added that demand destruction generally emerges through lower industrial activity, reduced discretionary consumption and weaker transportation demand.
The governments across several countries have already started implementing fuel-saving and demand-management measures.
Germany has capped increases in fuel prices, while the European Commission has encouraged reduced driving, lower air travel and work-from-home arrangements.
Australia has reportedly made public transport free to reduce private vehicle usage, while countries across Southeast Asia including Thailand, Indonesia, the Philippines and Vietnam have introduced mandatory work-from-home policies for government and public sector employees.
In India, the central and state governments have urged people to make more use of public transport.
The report said if global demand slows further due to these adjustments, market tightness may ease over time, which could eventually soften crude oil and fuel prices. (ANI)
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