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Oil Prices Strength Capped in 2019 | Finance Brokerage

Oil prices have surged over 20% in 2019, although there was a lack of sharp jumps and futures barely closed in on the $70 mark. This came in spite of the strikes on Saudi Arabia’s energy sector, restrictions that hit exports of two members of the OPEC. There have also been major supply reductions from key producers.

Crude benchmarks all posted gains during the first quarter of this year. The following months saw unexpected supply changes that in the past would have driven the oil higher than $100 per barrel.

Prices did register significant increases. But those only lasted for a short time due to the drone and missile attacks on the world’s largest producer.

The strikes on Saudi Aramco’s facilities briefly send the Brent above $72. However, the crude prices eased after ten days as the state-controlled oil company resumed operations.

Rising inventories offset cuts from the Organization of the Petroleum Exporting Countries (OPEC), and declining global demand. Oil prices are expected to stay range-bound in 2020, according to brokers and analysts.

US crude CLc1 is set to end 2019 with a gain of about 35%.

The index has only climbed 3% by the end of March, following a rally early in the year after US sanctions.

International benchmark Brent has added 26% but was 1% short since the first quarter.

Oil Prices Stand Firm in the Face of Supply Shocks

Brent and US oil futures have remained strong so far in 2019. That is so despite the limits on OPEC members, Venezuela and Iran.

Following the attacks on Saudi Arabia’s biggest crude processing plant and oil field in September, oil prices remained range-bound after an initial spike.

Traders and analysts saw US output and low demand as contributing factor that capped prices.

The US is likely to be a net petroleum exporter on a yearly basis for the first time next year. Meanwhile, production is likely to reach around 13.2 million barrels per day, rising nearly a million from 2019.

The International Energy Agency (IEA) stated that there is a possibility of the annual US output slowing down.However, the country could still make up around 85% of the increase in worldwide production to 2030.

US inventories would need to slow down if the market would like to see a more optimistic outlook for prices, according to portfolio manager Greg Sharenow.

If supply growth moves down in a much more sustainable way of about 500,000-600,000 bpd. Then suddenly, the world is much better in 12 months, Sharenow said.

President of a Washington DC-based energy market consulting firm, Bob McNally, said demand growth cratered. But US production continued to barrel along at high and geopolitical risk eased.

And now, weary investors are looking to next year and seeing a tsunami of oil, he added.

Investors’ fear over the crude’s demand hitting a peak is likely to put the oil market under pressure in 2020.

Moreover, as the partial trade deal remains unsigned, market spectators kept a cautious stance on the outlook for demand growth of the US and China’s energy industry.

The Energy Information Industry (EIA) sees next year’s average crude prices to be weaker than this year.

Output in Brazil, Norway, and Guyana will also likely continue expanding.

 



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