MW: Oil prices rise on view U.S. crude output will keep slowing
Oil prices gained on Tuesday on expectations that a slowdown in U.S. oil production will accelerate, though the continued supply from the rest of the world kept a cap on the gains.
Other major producers, from the Organization of the Petroleum Exporting Countries to Russia, are continuing to pump oil at speed as they look to defend their market share.
“U.S. crude oil production has begun to turn lower more sharply than we had expected, making it likely that non-OPEC production growth will turn from expansion to contraction in 2016 for the first time since 2008,” analysts at Deutsche Bank said in a report. “Even so, we estimate the oil market will remain oversupplied in 2016.”
Brent crude LCOX5, +0.84% the global oil benchmark, rose 0.9% to $48.40 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLX5, +0.95% were trading up 0.9% at $44.82 a barrel.
Oil prices have been trading largely sideways this month following the turbulence of August, when markets were rattled by mounting signs of a slowdown in China, the world’s No. 2 oil consumer. Brent is down 3.30% so far in September, while WTI is down around 9%.
“We expect WTI futures to remain under pressure, hovering around $44-$48 per barrel in the short-term, as bearish oil fundamentals add further pressure,” said Myrto Sokou, senior analyst at Sucden Financial.
Market participants are focusing on U.S. oil production, whose relentless growth in recent years fueled the global oversupply. U.S. output peaked at 9.6 million barrels a day in April and has fallen to below 9.2 million barrels a day since. London-based consultants Energy Aspects sees U.S. production falling to 8.9 million barrels a day by December.
Despite the U.S. slowdown, Deutsche Bank estimates that the market will remain oversupplied by about 1 million barrels a day in the first half of next year and then move into a deficit of 310,000 barrels a day in the second half of the year. Among those barrels will be an increase in Iranian output following the removal of the international sanctions against Tehran, the bank says.
