Crude oil prices in 2019 averaged US$63 per barrel, a drop from $70 the year before, reflecting a slowdown in oil demand as the US-China trade war weakened the global economy.
The International Monetary Fund (IMF) in its most recent report in October forecast global economic growth for 2019 of just 3.0%, the lowest level in 10 years and a substantial drop from 3.6% the year before. It has seen a significant slowing of the global economy, chiefly as a result of reduced production in the industrial sector.
The International Energy Agency (IEA) estimated global oil demand in 2019 would grow by 1 million barrels per day (bpd), down from 1.1 million bpd in 2018. Meanwhile, US crude output continues to climb, with production in November 2019 reaching 12.9 million bpd, a 7.3% increase from the same period the year before.
For the full year, the US Energy Information Administration has forecast production averaging 12.3 million bpd, up sharply from an average of 11 million bpd in 2018. The United States has now moved ahead of Russia and Saudi Arabia as the world's largest oil producer.
US crude imports have also been climbing steadily, averaging 2.9 million bpd through November 2019, an increase of 900,000 bpd or 48.4% from the previous year, as new pipelines have increased crude transport capacity, mainly from Canada.
However, world crude prices have gained support from a coordinated effort by Opec and its allies -- including No.2 ranked producer Russia -- to cut output by 1.2 million bpd. Iranian and Venezuelan crude production has also dropped, by 1.2 million and 600,000 bpd respectively from 2018, due to US sanctions on their crude exports.
2020 OUTLOOK
In 2020 the Dubai crude price, the main reference for Southeast Asia, is expected to average between $55 and $65 per barrel. Global oil demand is forecast to grow by 1.2 million bpd according to the most recent IEA report in December, from 1 million bpd in 2019. The rise in oil demand should stem from an uptick in global economic growth to 3.4% from 3%, based on IMF forecasts.
The global economic outlook has been improving since major central banks worldwide resumed stimulus efforts, easing monetary policy by lowering interest rates and buying bonds to increase the money supply in the economic system. Global economic growth is expected to come from both developed and developing countries.
US-China trade relations also appear to be improving, with a phase-one agreement expected to be signed in January. Many more sensitive issues remain to be resolved, and further talks are expected to continue well into 2020, also a presidential election year in America.
Meanwhile, Opec and Non-Opec producers have agreed on deeper output cuts beyond the original pledged amount of 1.2 million bpd. From January to March 2020, thy intend to take 1.7 million bpd off the market to help maintain price stability. Saudi Arabia has pledged to cut another 400,000 bpd, bringing the total cuts to 2.1 million, if all other parties live up to their commitments.
In addition, Iranian and Venezuelan production will remain low as a result of US sanctions on the countries' crude exports. Tensions in the Middle East are likely to flare up from time to time, raising concerns about oil supply risks.
However, crude prices in 2020 are still under pressure as production from non-Opec countries, led by the US, Norway, Canada and Brazil, is forecast to increase by between 1.8 million and 2.2 million bpd. US output is expected to go up by approximately 1.4 million bpd.
The extra US output comes from shale oil production, which accounts for 70% of total domestic production, as more transmission pipelines start operating in 2019 and 2020, making it easier and cheaper to get the oil to market.
US crude exports, meanwhile, are expected to rise to an average of 3.6 million bpd, an increase of 700,000 bpd from 2019. Meanwhile, Norway's production will go up by 300,000 bpd once a North Sea field starts operating at its full capacity in 2020.