August was not a good month for commodities as uncertainty surrounding the US-China trade war is continuously weighing on the global economy.
The back and forth escalation of this issue is keeping the pressure on prices of cyclical commodities like oil, gasoline, and copper. Oil price did not dip significantly but still August has been a difficult and volatile month for oil prices and equities and also concern about a global recession damping oil demand. According to the US energy information, the administration forecasted that the U.S shale production would increase by at least 2 million per barrels of oil day each year for several more years. But according to EIA's drilling productivity report, the legacy decline 6.14% per month or 505,737 barrels per day from December 2018 which was 8,232,750 barrels per day and finished the first half of 2019 flat in terms of December 2018. But if you think U.S shale won't grow, you may have to think again as the production will be heavily weighted in the second half of the year. Now if I come to August what has happened in this sector, let's take a little informatic dive. The S&P GSCI which tracks 24 commodities across five sectors energy sector will be the largest decliner more than 4% of the month and in Bloomberg commodity index Gold will be the heaviest weighted, declined more than 2% in August among 23 commodities.
If we look at crude oil prices, it remains anchored to broad-based sentiment prevailing on the global financial market. Prolonging geopolitical jitters, OPEC output scheme, worries about supply disruption in the Persian Gulf and the Gulf of Oman, you can tell it " strait of Hormuz" world's most strategically important choke points which provides the only sea passage from the Persian Gulf to the open Ocean, amid scattered sparring between US and Iran have correspondingly failed to generate lasting gains.
From the economic point of view based on the recent quarter, 71% of sector participants reported results that were in line or better than consensus and sector EBITDA was up over 17% from the same period of last year. That means many participants have continued to capture new growth and opportunities which particularly related to the Permian basin and export demand - a steady pace of US production and global demand.
Improved drilling and completion techniques and cost control measures are allowing producers to achieve well economics today and have recently begun to focus on delivering free cash to investors rather than quick production growth, absolute volume growth is still likely to be healthy.