Oil prices in 2019: experts’ forecasts

Experts’ opinions diverged on oil prices outlook for 2019-2020. But the vast majority of them are pointing to the same factor - exiting crisis conditions by the global economy would have a positive effect on oil prices in 2019. Even though a moderate slide is forecasted for the first half of 2019.

Comparing oil prices in 2018 and 2019: how it was and how it became.

The cost of black gold reached $70 per barrel in 2018. Several factors influenced the price to breach that level at the same time: limited supply and demand momentum spike. Sustainable growth and demand increase is predicted for the nearest five years which should lead to oil prices surge starting from April 2019.

Several factors would have an impact on oil prices in 2019: a new wave of the petrochemical industry development in the United States and fast economic growth in the Asian region. Exactly those statements will play a weighty role in the price policy formation, which should cause a change in the price trend in 2019-2020. The daily consumption level had stopped on a mark of 1.6 million barrels in 2018. Experts note a need for a cut in production volume, limiting global oil output.

Global sentiment and oil price forecast for 2019.

This year’s oil price surge to $70 per barrel has been mostly achieved by an arrangement for output cut. OPEC’s agreement allowed narrowing down oil market disbalance which has been clearly noted this year. As a result, that caused the surge in quotes, and the limitations would be staying on the table till the end of 2018, although Saudi Arabia, like several other giant oil producers, will keep the current output quotas 10-20 years from now. The same issues will be discussed with experts from the Russian Federation. All of those efforts are directed to keep the positive dynamics in the cost of black gold.

Despite optimistic forecasts, analysts do not forget reminding about an upcoming largest downfall of investment in the oil production industry in the period of 2018-2020, compared to the investment levels in 2014. Those figures would be slashed 50%. Most of the global projects are currently at the freezing stage or from a medium-term perspective, therefore, new oil production fields search has to be postponed for an indefinite period.

Oil price in 2019-2020 - Central Bank’s forecast.

The closer the end of the year, the more actively experts review their previous predictions, making new ones. Central Bank’s officials stated that oil price will continuously decrease from the level of $70 in the nearest future. Approximate price calculations are as follows: oil price should climb towards $55 per barrel in 2019, though some experts were predicting $45 per barrel, while the quote should reach the level of $50 in 2020 with an earlier estimate around $42. A potential exit from the economic turbulence globally should support oil prices, as most of the analysts agree. Standard & Poor's agency predicted $60 per barrel in 2018, however, the price would slide to $55 in 2019/20.

Short-term changes play a positive role in the oil sector momentum, shifting average price levels. BNP Paribas officials had published the most optimistic statement and declared the cost of one barrel to exceed $65, underlying the political crisis in Venezuela which should force the local government to lower the supply volume.

Negative factors influencing oil price in 2019.

Optimistic forecasts sound in the Russian Federation, as well as some global expert agencies. However, several governments do not exclude a number of threats which could negatively influence the price growth. Here are some of them:

Shale mining surge in the United States. Several North Americal corporations refused to make an agreement with OPEC, enlarging shale production and supply. Increasing the output volume would lead to a supply spike which could reach the level of 1.7 million barrels per day in 2019. Such a situation would dramatically change the forecast for 2019-2020.
Some large players are interested in reshuffling the oil production markets - that would cause competition tightening. In addition to that, OPEC members keep expressing cautiousness regarding the shale production spike in the United States.
Chinese economy instability. Despite the double-digit growth, the Chinese economy keeps worrying investors. A potential plunge would lead to a global economic meltdown.
Alternative energy sources. Many leading car manufacturers shift their focus to electric cars as the future for the automotive industry, erasing the space for the black gold. If that sentiment is going to develop further, then no oil price growth would be on the table.

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Analysts hold a wait-and-see position, while they keep expressing their optimistic and pessimistic opinions. They predict that oil price would keep declining towards $50 per barrel and below, while others note a price uptrend starting from the middle of 2019. It’s worth reminding that a more significant cost increase than a range of $50/70 remains unlikely.
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