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Oil Prices Set To Rebound In 2019



Crude oil prices ended the year with a small rally, and analysts expect oil to rise higher in the coming months.

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Wall Street: Oil prices will rebound. Most large investment banks expect a rebound in oil prices in 2019. Price forecasts vary greatly, but most have WTI and Brent above current spot prices. Bank of America Merrill Lync, for example, sees WTI averaging $ 59 per barrel in 2019. Citi is at the end of bearish with a target price of $ 49. For Brent, Barclays said the benchmark would average $ 72, and half a dozen investment banks others have estimated prices in a few dollars from that price.

Financial volatility continues. After suffering heavy losses at the start of the week, financial markets rose strongly on Wednesday and Thursday, regaining all that was lost from Monday. Weak industrial data from China released this week still show signs of slowing down.

The Saudi reshuffle makes the MbS still in control. King Salman overhauled the Saudi cabinet on Thursday, exchanging top security personnel. But the maneuver did not remove power from the crown prince Mohammed bin Salman. Officials appointed were close to MbS.

The formal OPEC + structure looks doubtful. After suggesting several times earlier this year that OPEC and non-OPEC partners – led by Russia – would formalize a permanent governance architecture to coordinate their efforts, the group now underestimates such developments. Russian energy minister Alexander Novak said that increasing bureaucracy, plus the risk of antitrust from the US government, made the idea too risky. "There is a consensus that there will be no such organization. That is because it requires additional bureaucratic brouhaha related to financing, the cartel, with the U.S. party, "Novak told reporters. Instead, Novak said they would continue to work together without institutionalizing the arrangement. "This will not be an organization, this is a number of cooperation mechanisms: to convene, to discuss, to adopt several memorandums, a joint resolution," Novak.

Bank of England: Banks need to reduce climate risk. The head of the Bank of England, Mark Carney, said that banks need to do more to clear their balance sheets from climate risks. When asked by the FT whether he was overstepping the authority of his institution, he rejected that notion. "Not at all," he said. "The problem around the climate is very broad, and will touch almost every sector." He said the bank had modeled financial risk from climate change and adjusted its portfolio, even though they needed to do more. "They see specific climate-related risks in their portfolios, [such as] their exposure to certain bits of the automotive sector, "he said." Like it or not, these items will become mainstream. "

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Shipments of LNG to Asia have reached record highs. The volume of shipment of LNG heading to Northeast Asia hit a record high in December, driven by demand from China and cold weather. LNG imports to the region – including China, South Korea, Japan and Taiwan – reached 20.5 million tons so far in December, or 5 percent higher than the previous monthly record.

Middle Eastern oil producers hit by U.S. debris. As Bloomberg reports, US shale hit major oil exporters from the Middle East in various fields. For one, the surge in production lowers prices. But also, US crude oil shipments to Asia reduced Saudi exports to the region. In addition, US and petrol and petroleum exports created excess products in Asia, forcing lower prices.

The price of natural gas in Permian dropped to zero, but rebounded. The glut of natural gas supplies in the Permian basin – byproducts from oil drilling – and a shortage of pipelines to bring gas to the market, have caused falling prices. In November, natural gas prices traded near zero for most of the month, and even dropped into negative territory. Prices have rebounded to $ 1.68 / MMBtu in December. The inauguration of the new oil pipeline next year can worsen the gas problem, because more takeaway capacity can cause more drilling, which will produce more gas production. "You will see things getting worse and worse with increasing oil production and gas production beside them," J.R. Weston, an analyst for Raymond James & Associates Inc., told the Wall Street Journal.

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Shell plans to develop Vaca Muerta. Royal Dutch Shell (NYSE: RDS.A) said that they plan to start developing shale oil fields in Argentina after selling refineries and retail fuel stations. Shell Vaca Muerta assets can generate 70,000 barrels per day by 2025.

Canadian production cuts take effect. The mandatory pruning of 325,000 barrels per day in Alberta is valid in January. The decision to force the company to reduce production has given a shock to Canada's heavy oil prices. The province believes full deduction is only necessary for the first three months of this year. After that, the province will try to release the wound but do it in a way that is suitable for takeaway capacity.

EV sales in Norway reach 60 percent. Between September and November, 60 percent of all new vehicle sales in Norway are electricity. EV quickly gained market share. In 2013, EV had 3 percent of the market, but in 2017 the share reached 39 percent. For the full year of 2018, the figure seems to be around 48 percent, even when EV sales accelerated in the final months of the year. Rystad Energy sees EVs controlling 90 percent of the market in Norway at 2022 and 100 percent by 2025.

By Tom Kool for Oilprice.com

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