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Oil Market Snapshot – August 2018 Saudi Production Fall Redistributes Gains to Allies UAE and Kuwait

Brent trades around $73/bbl for most of August, balanced between concerns over supply later in the year and ongoing trade spats between the US and China. Futures are in backwardation near term, but show a move to contango in 2Q2019, indicating the market sees the end of 2018 undersupplied, switching to oversupply mid-2019. Our average Brent forecast for 2018 is largely unchanged and now stands at $72.67/bbl (-$0.53/bbl on previous). We see Brent averaging $72.64/bbl in 2019. Our global demand growth forecast is trimmed slightly but remains robust at 1.60 million b/d (-60,000 b/d on previous). Indian demand continues to surge, with the IMF projecting Indian GDP growth to overtake China this year. Our 2018 global supply growth forecast is revised lower to 1.39 million b/d (-220,000 b/d on previous), incorporating historical data revisions and weaker growth in ex. US non-OPEC. We provide a macro-view on offshore exploration and development activity across the globe, showing a brightening picture....

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