Analysts at MUFG Bank, point out that with crude oil prices moving around USD60 (WTI), production could continue to slow in the future.

Key Quotes:

“Oil prices (WTI front month) started July at just above USD59 per barrel and subsequently rose to around USD60.5 in the second week of the month owing to an extension of the agreement by OPEC+ to reduce their oil production and the increasing tension between the US and Iran. However, fears about a fall in demand grew again as demand for oil from the US slowed and China’s real GDP growth rate for the April-June quarter was the lowest since the country started to announce its growth in 1992. As a result, oil prices continued to fluctuate between USD55 and USD59 per barrel.”

“The downward pressure on demand for oil from the cyclical deceleration of the global economy and the conflict between the US and China continues. Looking back over the last year or so, demand remains mostly unchanged”.

“The number of working US shale oil rigs continues to decrease as oil prices drop below USD60 – the break-even price for US shale oil- resulting in a deceleration of US shale oil production. There is a strong possibility that production will continue to slow in the future as oil prices fluctuate around USD 60 per barrel”.