KUWAIT, KAMCO announced on Sunday that average monthly oil prices of OPEC crude retreated by 1.4 percent in August to reach USD 72.3 pb while Kuwait’s crude plunged by 0.7 percent to reach USD 71.8 pb.
KAMCO said in a report that oil prices rose on impending supply crunch and dwindling confidence in spare capacity. Brent crude futures reached five-month high to breach the USD 80/b level for the first time since May-18 backed by a number of factors that included a higher-than-expected drop in crude inventories in the US, onslaught of Hurricane Florence and tropical storm Gordon in the US during the first half of September18, the looming US sanctions on Iran and production disruptions in some key oil producing nations.
On the other hand, the ongoing trade tensions between the US and China continues to rattle emerging markets across the globe, including oil prices. Talks of import duty on additional Chinese goods and its reciprocal reaction has put downward pressure on oil prices along with a broader weakness in the other emerging market benchmarks.
Supply side concerns also included the level of spare capacity with global oil producers in the face of Iran sanctions coupled with production disruptions elsewhere.
According to recent data, OPEC production has increased at a lower-than-expected pace recently while producers like Venezuela and Libya continue to face production issues.
According to the latest monthly report from the IEA, production in Venezuela could fall to 1 mb/d by the end of the year. Markets would now be looking at the indications from the upcoming Joint Ministerial Monitoring Committee between OPEC producers and their allies later this month that would set the course for future production agreement between OPEC+ members.
Oil traders also kept a close eye on Hurricane Florence that made a landfall on the US East Coast during the second week of September-18. Unlike the tropical storm Gordon that hit the US Gulf Coast during the first week of September-18 temporarily affecting oil production in the Gulf of Mexico, Hurricane Florence was not expected to affect oil production or supplies. However, the hurricane, even with its strength lowered from category 4 to category 2, is expected to result in a temporary increase in fuel purchases and its impact is only expected to be limited to gas pipelines in the affected region.
The most recent weekly US oil inventory data from API reported a higher-than expected drop in US crude inventories.
According to the report, US crude inventories declined by 8.64 million barrels during the week ended 7-Sep-18 to reach 395.9 million barrels. The EIA weekly oil inventory report also showed a decline of 5.3 million barrels to reach 396.2 million barrels, the lowest level since February-15 and 3% below the 5-yr average inventory level.
Reports also pointed to pipeline constraints, especially in the Permian Basin, that is limiting the flow of crude from the region and affecting production and has also resulted in a decline in drilling activity in the region.
Separately, in its Short Term Energy Outlook, the EIA lowered its US crude production growth forecast for 2019 to a growth of 0.84 mb/d from 1.02 mb/d and production is now expected to average at 11.5 mb/d as against the previous forecast of 11.7 mb/d.
On the other hand, the report forecasted a decline in oil demand growth in 2019 from 0.29 mb/d to 0.25 mb/d.
Source: Kuwait News Agency