Oil Prices in 2020

[nehad ismail + 6]

Only a brave or a reckless analyst can predict precisely what happens to oil prices during 2020. Today the benchmark Brent rose by 4% to $69.16 and WTI to $63.84  the highest since Mid September last year. The sudden rise in prices came after the annoucement that Qassem Soleimani the Iranian Commander of Quds Force was killed in an American raid early Friday morning at Baghdad airport.  

The real fear is that Iran might retaliate against US targets in the Middle East. Such action would trigger an unpredictable escalation between the US and Iran and could also involve Iraq. Prices could jump above $80 per barrel if Iraqi oil exports are disrupted. Iraq exports almost 3.5 million barrels per day.The geo-political tensions in the region over the last two years had played a pivotal role in supporting prices.

In general terms prices will continute to rise during 2020 if the trade war between China and USA  comes to an end. There are indications that an initial agreement is within reach between the two sides. The big unknown apart from the geo-political tensions, is the size of the global demand. According to International Energy Agency global demand for oil will increase by 1.2 million barrels during 2020. As for the supply side there is sufficient oil being produced to meet current world demand and more oil is on the way from Norway, Brazil and USA. The recent agreement between Kuwait and Saudi Arabia to share the disputed oil fields of Wafra and Khafji will pump some extra 500,000 barrles a day to the global supply. It is worth noting that the early December production-cut agreement agreed between OPEC+ to cut 1.7 million barrels per day, has been cancelled out by the rising production from non-opec sources which is bringing 2.3 million barrels per day to an already well supplied market.

What will happen next to oil prices depends largely on what Iran will do exactly. The rhetoric coming  from Tehran threatens a crushing revenge which would lead us to speculate whether Saudi oil facilities would be targeted? The Arabian Gulf States and their oil installations are vulnerable to Iranian attacks. They are soft targets and within easy reach of Iranian missiles. The other possibility would be if Iran attempts to disrupt the flow of oil through the Strait of Hormuz?  If blocked completely, the world would lose some 18 million barrels per day.This would deprive the market of some 20% of the global sea-borne oil supply and would have serious consequences for the energy markets. How would America retaliate? We might see prices escalating to unprecedented levels. Who knows? What is clear is the escalation in tensions, would boost oil prices at least in the short term. Watch this space.

Therefore it is not possible to make an accurate forecast of what happens to oil prices over the next few weeks or months.

Edited January 3, 2020 by nehad ismail
Rising tensions and threats of revenge from Tehran

[Guest]

17 hours ago, nehad ismail said:

The real fear is that Iran might retaliate against US targets in the Middle East.

Might?

17 hours ago, nehad ismail said:

 during 2020 if the trade war between China and USA  comes to an end.

It won't 'end' for ages in my opinion. How would we even clarify 'end' anyway? This'll be going for years but if Trump or whoever loses then it all changes. 

17 hours ago, nehad ismail said:

There are indications that an initial agreement is within reach between the two sides. 

How many times have we heard that just in 2019? And it's still just 'initial agreement' or 'phase 1' even now, after what, nearly 2 years? And the market falls for it every time.

17 hours ago, nehad ismail said:

The rhetoric coming  from Tehran threatens a crushing revenge

Hold the front page, Iran's leaders are angry and full of hate. This weekend just strengthened their opinions. 

Good post Nehad, ignore my sarcastic replies, nothing personal  , sometimes it's just quicker to write one liners. @Tom Kirkman knows. 

Edited January 4, 2020 by Guest

[nehad ismail + 6]

Thanks @Tom Kirkman

I appreciate your remark Tom. Thanks buddy.

[Tom Kirkman + 8,860]

13 minutes ago, nehad ismail said:

Thanks @Tom Kirkman

I appreciate your remark Tom. Thanks buddy.

Um, you're welcome.  But I have no idea which remark you are referring to.

[nehad ismail + 6]

@Tom Kirkman: Isn't this your comment? Good post Nehad, ignore my sarcastic replies, nothing personal  , sometimes it's just quicker to write one liners. @Tom Kirkman knows

[Tom Kirkman + 8,860]

8 minutes ago, nehad ismail said:

@Tom Kirkman: Isn't this your comment? Good post Nehad, ignore my sarcastic replies, nothing personal  , sometimes it's just quicker to write one liners. @Tom Kirkman knows

Nope, that was @DayTrader

[nehad ismail + 6]

Thanks @Tom Kirkman I hrealized that after I replied to you. No harm done I hope.

[Tom Kirkman + 8,860]

28 minutes ago, nehad ismail said:

Thanks @Tom Kirkman I hrealized that after I replied to you. No harm done I hope.

Heh heh, no worries.  Carry on.