Given the current level of uncertainty in the oil markets, it is not straightforward to place bets with any degree of conviction on the price of oil in the short to medium term.
Positive drivers on the price of crude oil through 2020 include continued heightening of tensions in the Middle East, the potential weakening of the U.S. Dollar, and extending OPEC supply cuts. Negative drivers include the increase and pace of growth of non-OPEC production, increasing U.S. shale oil production, slowing global oil demand, the slowdown in the growth of the Chinese economy, the Coronavirus outbreak, the willingness, or the ability, of some OPEC members to continue to hold current production levels. Those are just some of the negative drivers.
Attending an E&P Leadership Team meeting in early January, the number of arguments for the bulls outweighed those for the bears by some margin. And yet here we are four weeks later (at the time of writing), many of the same people are already reconsidering their current positions for the year ahead. Some of the budget assumptions suddenly seem questionable. I am still whether wondering some of the attendees genuinely believed that oil prices might end the year closer to $70 than $50.
Caution should be the primary sentiment when trying to understand better where oil prices could go in 2020. The key here is not to lose sight of the fundamentals. Given all the factors in play, we find it hard to disagree with the bearish views on oil prices for the year ahead expressed by the International Energy Agency (IEA) for 2020.