Oil Price Outlook
Positive drivers on the price of crude oil through 2020 include heightened tension in the Middle East, a strong US Dollar, and OPEC supply cuts. Negative drivers on the price of crude oil through 2020 include increasing non-OPEC production, increasing US shale oil production, and slowing global oil demand.
- Tension in the Middle East is pushing crude oil prices up.
- This tension includes tension between the US and Iran, attacks on oil tankers in the Persian Gulf, and US attacks on Saudi Arabia’s oil infrastructure in late 2019.
Strong US Dollar
- Global crude oil prices are tied directly to the US dollar, which has been strong since 2014.
- The US dollar is expected to remain strong through 2020 and 2021.
- OPEC has limited the amount of oil output from their member countries in 2019, in order to stabilize prices and offset an increasing supply from non-OPEC countries.
- OPEC estimated that demand for its oil in 2020 would be 1.12 million bpd less than in 2019.
- Crude oil production from non-OPEC countries, like Brazil, Canada, Norway and Guyana, is increasing.
- Non-OPEC production is set to add 2.3 million barrels a day to supply in 2020. This is more than the anticipated increase in demand and therefore is exerting negative pressure on global oil prices.
Increasing US Shale Oil Production
- The US has slowly been increasing the amount of shale oil they produce since 2015.
- In September 2019, the US exported more oil than it imported for the first time since 1948.