Doha: Oil prices witnessed consecutive gains after declining for the first two trading sessions in September. The gains came on the back of expectations of further cuts in output from the Opec group coupled with a decline in US crude inventories. However, weak economic data released at the start of the month kept a lid on any significant increase in prices, according to KAMCO Research.
Data for August-19 showed that manufacturing activity in the US has slowed down to multi-year lows whereas Euro zone manufacturing slump continued for the seven consecutive month. The latest EIA report showed US crude inventories declining for the fourth consecutive week aggregating to a decline of 24 million barrels to reach 416 million barrels. In terms of production, the US EIA lowered US oil production forecast for 2019 in its latest Short Term Energy Outlook.
According to the report, US crude output would reach a record high of 12.24 mb/d in 2019, an increase of 1.25 mb/d as against previous growth expectation of 1.28 mb/d. The output is expected to reach 13.23 mb/d in 2020. The growth also comes as pipeline constraints are gradually resolved in the Permian basin. Nevertheless, the rate of growth has slowed down recently as reflected in the latest rig count data. According to latest weekly report from Baker Hughes, US oil rigs declined for the ninth consecutive month to reach the lowest level since January-18 as drillers slash spending on new drilling projects.
A report from Rystad Energy said that US oil production growth would be half of 2018 growth in 2019 and 2020 as drillers invest less in drilling new rigs on the back of low oil prices. According to the report, oil services companies related to shale are expected to lower spending by 6 percent. Meanwhile, demand concerns and US China trade war affected crude oil prices during August-19. Average OPEC crude prices declined by 7.9% m-o-m and reached below the $ 60/b mark for the first time in seven month at USD 59.6/b. Brent crude also declined at the same pace to average at $ 58.8/b whereas Kuwait crude declined at a slightly smaller rate of 7.0 percent to average at $60.4/b.
