Brent and NYMEX light sweet crude remained range-bound in the US$40s through September, but no one in the market was subscribing to it as the bottom, amid a persistent supply overhang and worsening prognosis for demand growth brought on by a string of gloomy economic headlines, especially in the emerging markets. Several banks and financial institutions once again lowered their price forecasts for 2015 and 2016, with Goldman Sachs planting US$20 a barrel in the market’s consciousness as a possible new nadir. Nine of the top forecasters monitored by Platts settled in a range of US$54 to US$58 a barrel average for Brent this year, and US$49.5 to US$62 a barrel next year. China’s economic slowdown and manufacturing contraction has become old news across the commodity markets. The new narrative to grab attention was an accelerated drop in US crude production and four straight weeks of decline in its onshore oil rigs count, reversing increases in the previous two months. The US Energy Information Administration revised down its US crude production forecast to 9.22 million barrels per day (bpd) for 2015 and 8.82 million bpd for 2016, with some analysts saying at the current rate of output decline, next year could see a far steeper drop, of 850,000 bpd. The latest weekly data showed production had slipped nearly 500,000 bpd from June’s peak of 9.6 million bpd. A flat West Texas Intermediate (WTI) forward price curve even two years out forebodes more cuts in US upstream capital spending, as hedges begin to roll off. Meanwhile, the second round of semi-annual bank loan re-determinations for the smaller US independents showed most managing to maintain their borrowing base, contrary to fears of massive deleveraging. Nevertheless, analysts warned many of the hardest hit smaller operators are inching towards restructurings or even bankruptcies, which would continue slowing down the drilling of new wells, shrinking production the rest of this year and into 2016. The International Energy Agency suggested non-Opec supply was poised for the biggest drop in more than two decades of nearly 500,000 bpd next year, and pushed up its “call” on Opec oil in the second half of next year to an average 32 million bpd, a level the group last pumped in the throes of the 2008 oil price super-spike. Oil trading in Asia at an inflection point The IEA’s bullishness notwithstanding, oil’s recent rout has renewed speculation on Opec’s strategy of defending market share over price. The group is expected to stand firm at its next meeting on December 4. Reports from a meeting of the oil ministers from the six Gulf Cooperation Council countries – including Opec members Saudi Arabia, the United Arab Emirates, Kuwait and Qatar – in the Qatari capital of Doha early last month suggested Opec is not expected to revisit its current strategy, and it also doesn’t expect any concrete action from sitting down with other major non-Opec producers. The Russians would agree. Vagit Alekperov, chief executive of Russia’s second-biggest oil producer Lukoil, told Russia 24 TV last month that harsh geographical conditions and the production equipment used at several Russian fields made it “technologically” impossible to reduce output. If the supply response is a puzzle, the demand side of the equation remains even harder to fathom. The IEA in its September report revised up its 2015 global demand growth forecast to 1.7 million bpd, by far the most optimistic of projections out there. Opec and the US EIA, in comparison, see 2015 consumption growing by 1.46 million and 1.40 million bpd respectively this year. While headline apparent oil consumption in China, which carries much of the weight of the global demand growth story, rose a remarkably strong 10 per cent from a year ago, it might be worth paying attention to the country’s growing refined product stockpiles, especially of gasoil, which has seen sluggish demand. These stocks are expected to start flowing out of the country in the coming months, with Platts estimating an overall 44 per cent jump in Chinese product exports this year, averaging just shy of 600,000 bpd. Sharp regional currency depreciations in recent weeks have eroded the benefit of much of the recent slide in crude prices across the import-dependent economies of Asia. Emerging markets weakness and incremental barrels from a post-sanctions Iran in 2016 could worsen the oil glut before it gets better, pushing market rebalancing further down the road. Some now believe that could be 2018. Vandana Hari is editorial director, Asia, at Platts