Where is oil headed? More cuts, more turmoil, especially in Iraq, the second-largest OPEC producer with production around 4.6 million barrels per day (bpd) , and in Iran where previous 3.5 million bpd production levels are down to almost nothing.
Higher prices, then?
Happy New oil prices
Oil closes out 2019 on a bullish note, pushed higher by renewed economic optimism, the OPEC+ cuts and a thawing U.S.-China trading relationship, according to Oil Price.com.
“Prices ended the year with optimism close to $70 per barrel for Brent and we expect them to stay supported through Q1 (2020),” OilX chief executive Florian Thaler told Oilprice. “In March, all eyes will remain on OPEC and OPEC+ and whether the action of production adjustment will be extended further.”
Oil prices rose on the first trading day of 2020 as warming trade relations between the United States and China and a potential 15 Jan 2020 signing of new trade deals eased demand concerns, and rising tensions in the Middle East raised worries about supply.
Global benchmark Brent crude futures, were up 21 cents, or 0.3%, to 66.21 a barrel while West Texas Intermediate (WTI) crude was up 21 cents, or 0.3%, at $61.27 per barrel.
Looking back and forward
Brent gained about 23% in 2019 and WTI rose 34%, their biggest yearly gains in three years, backed by the recent breakthrough in the trade talks and output cuts pledged by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, according to BreakingNews Reuters.
Forecasters do not expect oil prices to move sharply in either direction in 2020. Brent crude is expected to hover around $63 a barrel, a Reuters poll showed on Tuesday, as OPEC production cuts offset weaker demand.
Over the past year, increased U.S. oil output offset the supply reductions undertaken by OPEC, led by Saudi Arabia and stemming from U.S. sanctions on Venezuela and Iran.
U.S. crude oil production in October rose to a record of 12.66 million barrels per day (bpd) but the pace of growth is expected to slow in 2020.
January also marks the start of the deeper output cuts by OPEC and its partners, including Russia. OPEC and its allies have agreed to cut a further of 500,000 barrels bpd from Jan. 1, on top of their previous cut of 1.2 million bpd that started on Jan. 1 a year ago.
A fall in U.S. crude inventories last week also supported prices. U.S. crude inventories fell by 7.8 million barrels in the week ended Dec. 27, compared with analysts’ expectations for a decrease of 3.2 million barrels, according to data from the American Petroleum Institute (API) released on Tuesday.