2019 Crude Oil Outlook: The Lower Prices Might Not Last

In 2018, the price of WTI crude oil started at about $60 a barrel. The price rallied to a YTD high of $76.9 in October. At this time, investors were optimistic that the price would continue rallying and the hopes were that the price would reach $100 a barrel this year. The rally was driven by a number of things. First, investors were hopeful about global growth. Second, there were hopes that the Iran sanctions would lead to a supply shortfall.

These ideas were deconstructed for a number of reasons. First, while global growth has continued this year, the outlook for the performance of the economy in the coming year has been reduced. Investors have been warned that the ongoing trade conflict will have serious consequences for the economy. In fact, the numbers released in November have shown a systematic decline in growth. Second, the Iran sanctions attracted more supply from OPEC and other oil producing countries. In November, Saudi Arabia oil minister said that the OPEC members were pumping as much oil as they could. This, in addition to the waivers the US gave out, led to a sharp decrease in the price. The price of WTI declined from above $76 to a low of $48. Brent, on the other hand, declined from $87 to a low of $57.5.

2019 will be an interesting year for crude oil for a number of reasons. First, a number of pipelines under construction in the US will be complete. This means that US producers will continue pumping and increasing the amount of oil they are producing. This is an important piece of information because, in the past, US production has been hampered by a lower number of truck drivers. With pipelines completed, the country will continue boosting production.

Another important thing is that global growth is expected to cool down in 2019. This cooling down will be led by the United States, where the benefits of the tax reform package will have reduced. The same is true with other regions. A slowing global growth tends to lead to lower demand for crude oil. Slowing demand, on the other hand, leads to lower oil prices especially at a time when the supply is increasing. Therefore, this could lead to a continued pace of lower oil prices.

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Mark Walla 4 months ago Member's comment

I took my profits but will buy back into any weakness. I don't believe this one’s a straight line up. Trader’s Mkt.