Oil Prices Down On Slowing Economic Growth Outlook 

..As US Output Set To Surge In September 

Yemisi Izuora 

Oil prices slumped on Tuesday, offsetting narrow gains in the previous session, on the expectation major producers would continue to reduce global supplies due to a slowing economic growth outlook. 

The International benchmark Brent crude futures were down 11 cents or 0.2 per cent from the previous settlement, to $58.46 a barrel, while the U.S. West Texas Intermediate (WTI) futures were $54.81 per barrel, down 12 cents, or 0.2 per cent from the last close. 

Saudi Arabia, the de-facto Organization of the Petroleum Exporting Countries (OPEC) leader, opened its books as part of plans to launch what could be the world’s largest initial public offering.

The financials released by Saudi Aramco showed “capital spending had been curbed by 12 per cent, maybe suggesting that supply growth is likely to remain tight,” said ANZ bank in a note on Tuesday. “This is likely to take some focus away from the weakening outlook for demand.”

Kuwait on Monday reiterated its commitment to OPEC+ supply curbs after Oil Minister Khaled al-Fadhel said Kuwait had cut its own output by more than required by the accord.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have agreed to cut 1.2 million barrels per day (bpd) since January 1.

But booming U.S. shale oil production continues to chip away at the groups efforts to limit the global supply overhang. 

U.S. oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September, to a record 8.77 million bpd, the U.S. Energy Information Administration forecast in a report.

Gloomy forecasts for the global economy and oil demand growth have weighed on oil prices as the trade dispute between the United States and China escalates.

The U.S. oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September, to a record 8.77 million bpd, the U.S. Energy Information Administration forecast in its monthly drilling productivity report on Monday.

The largest change is expected in the Permian Basin of Texas and New Mexico, where output is seen climbing 75,000 bpd to 4.42 million bpd in September, also an all-time high. That is the biggest increase forecast for the basin since April.

Output in North Dakota and Montana’s Bakken region is expected to edge higher by 3,000 bpd to a record 1.44 million bpd, the data showed.

Production increases in the Permian and Bakken have been at the forefront of a shale boom that helped make the United States the biggest oil producer in the world, ahead of Saudi Arabia and Russia.

Output increases in the Permian, the country’s largest basin, had slowed as independent oil producers cut spending on new drilling and completions and focus more on earnings growth. Still, majors are ramping up spending.

Permian oil production had also surged beyond pipeline takeaway capacity, weighing on regional oil prices for over a year. But the start up of new pipelines, such as Plains All American Pipeline LP’s 670,000-bpd Cactus II pipeline system, are beginning to support prices there.

In the Niobrara, spanning Wyoming and Colorado, output is expected to rise by 12,000 bpd to a record 758,000 bpd.

Separately, U.S. natural gas output was projected to increase to a record 81.6 billion cubic feet per day (bcfd) in September.

That would be up 0.7 bcfd over the August forecast, putting production from the big shale basins up for a fourth month in a row even though the number of rigs in each region has declined since the start of the year.

That is because rig productivity – the amount of gas new wells produce per rig – was up in every region since the start of the year. A year ago in September, output was 73.3 bcfd.

Output in the Appalachia region was set to rise almost 0.4 bcfd to a record 32.6 bcfd.

The EIA said producers drilled 1,311 wells and completed 1,411 in the biggest shale basins in July, leaving total drilled but uncompleted (DUC) wells down 100 at 8,108. That was the biggest monthly decline in DUCs since March 2018. 

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