BHP Billiton: Trade tensions are 'exceedingly unhelpful'

Global markets have been upended by U.S. trade measures targeting China, Europe and North American economies. Implemented to boost domestic economic sectors, tariffs also increase the price of goods and could present headwinds for global economic growth.

In its economic and commodity outlook report for the year, the Australian mining and energy giant forecast global economic growth would likely be in the range of 3.5 percent and 4 percent for 2018, on par with last year and up from the 3.25 percent growth from 2016. Most of the industrialized economies should experience robust growth, though China, the world's second-largest economy, is slowing down.

Trade tensions, however, are expected to have a negative impact on the global economy.

"While we stress that an increase in trade protection alone is not a recessionary level shock for the global economy, it is an exceedingly unhelpful starting point for the pursuit of broad based growth across regions, expenditure drivers and industries," Huw McKay, the company's vice president for market analysis and economics, wrote in the report.

Growth in global gross domestic product is expected at between 3.25 percent and 3.75 percent through 2020.

On the demand side, the company's economists said that through May the appetite for oil was 1.9 percent more than at this point last year, though there were indications that a slowdown began in June.

Looking at the United States, on pace to be a global leader in oil production, BHP said it expected output to increase by about 1.5 million barrels per day next year, driven for the most part by the Permian shale basin. That pace, however, is slower than last year by about a half million barrels per day.

U.S. oil and gas production trends are outpacing existing pipeline capacity, leading to constraints on output. That situation is compounded by U.S. tariffs on imported steel, which makes pipeline components more expensive.

"Takeaway constraints are expected to persist deep into calendar year 2019," BHP's forecast read.

British energy company BP in July agreed to pay $10.5 billion to acquire the onshore U.S. shale assets from BHP. BP adds 470,000 acres to its U.S. onshore portfolio, including a position in the Eagle Ford, Haynesville and Permian shale basins. All told, the new acreage holds 4.6 billion barrels of oil equivalent resources.

BHP remains tied to the U.S. energy sector with an equity interest in the Samurai project in the Gulf of Mexico, an emerging reservoir.

For the 12 months ending in June, the company reported earnings improved 33 percent over last year to $8.9 billion, slightly lower than analyst expectations.