• 3 minutes Natural gas is crushing wind and solar power
  • 6 minutes OPEC and Russia could discuss emergency cuts
  • 8 minutes Is Pete Buttigieg emerging as the most likely challenger to Trump?
  • 11 minutes Question: Why are oil futures so low through 2020?
  • 13 minutes Don't sneeze. Coronavirus is a threat to oil markets and global economies
  • 15 mins So the west is winning, is it? Only if you’re a delusional Trump toady, Mr Pompeo, by Simon Tisdall
  • 5 mins Peak Shale Will Send Oil Prices Sky High
  • 2 hours "Criticism of migration will become a criminal offense.  And media outlets that give room to criticism of migration, can be shut down." - EU Official to the Media.
  • 1 hour Charts of COVID-19 Fatality Rate by Age and Sex
  • 7 hours Fight with American ignorance, Part 1: US is a Republic, it is not a Democracy
  • 8 hours CDC covid19 coverup?
  • 3 hours Oil and gas producers fire back at Democratic presidential candidates.
  • 23 hours “The era of cheap & abundant energy is long gone. Money supply & debt have grown faster than real economy. Debt saturation is now a real risk, requiring a global scale reset.”"We are now in new era of expensive unconventional energy
  • 9 hours Democrats Plan "B" Bloomberg Implodes. Plan "C" = John Kerry ?
  • 23 hours Who decides the Oil costs?
  • 1 day Blowout videos
Alt Text

Peak Shale Will Send Oil Prices Sky High

With much of the cheap…

Alt Text

Goldman Slashes Oil Price Forecast By $10

Goldman has doubled down on…

Alt Text

Oil Tanks On Fears Of Global Economic Crisis

Oil prices crashed on Monday…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Why Oil Traders Are More Bullish On 2020

Optimism among oil traders is rising despite mixed signals from the world’s top oil consumers, largely thanks to signs that pressure is easing between Washington and Beijing and the latter’s record-breaking oil imports.

Brent crude and West Texas Intermediate have both been on a more or less steady rise for about four weeks now. During that period, OPEC+ agreed to deepen its production cuts by half a million bpd, China continued importing crude at record-breaking rates, and U.S. industrial production rebounded in November.

While not everyone was convinced that the deeper cuts will make much of a difference if not everyone in OPEC and outside it complies with their new quotas, the fact of the announcement of additional cuts must have made the right impression. That’s despite a warning from the International Energy Agency that next year the global oil market could swing into oversupply.

Meanwhile, China reported yet another record-breaking month of oil imports: the average daily for November was 11.18 million bpd, which, according to Bloomberg, was unprecedented. This was largely thanks to the ramp-up of two new refineries with a combined capacity of almost 900,000 bpd, but also because of signs of thawing between the U.S. and China.

The two have been cautiously getting closer to a preliminary deal despite setbacks. The latest from President Trump on the topic was that the parties are almost done with the so-called “phase-one” deal, and all that remains is for it to be translated. Related: Texas Driller Goes All-In On This New Oil Frontier

"I said make sure you have the right translators because you can lose a lot with bad translation. So we're working on getting that done," Trump said, as quoted by CNN.

While translators are working on the document, the U.S. administration is focusing on the economy. As Reuters’ John Kemp pointed out in his latest column on prices, this year the Fed cut interest rates by as much as 75 basis points to sustain growth and spur it on. The latest data in jobs and industrial production is encouraging for oil demand.

Payrolls in November shot up by 266,000, beating analyst expectations of 187,000 new additions, and industrial activity inched up by 1.1 percent last month after a fall of 0.7 percent in October. However, it bears noting here that the expectation-beating November figure was the result mainly of a pick-up in the carmaking industry after the six-week strike of UAW workers for GM.

Industrial activity data from China added to the optimism about the immediate future of oil demand. Like the U.S. November figures, those for China exceeded expectations. The combined positive effect of U.S. and China data offset bad economic news from India, where industrial activity shrunk by 3.8 percent in November. Eurozone industrial activity also fell, but that region is not among the top oil consumers, and economic updates are not high on the watch-out-for agenda of oil traders. Related: The 5 Biggest Threats To Oil & Gas In 2020

In further good news for oil bulls, as Reuters’ Kemp noted in his column, the governments of China and India have set up economic stimulus packages, whose effect on oil demand will be certainly positive. Even the German government is considering economic stimulus after a contraction earlier this year.

No wonder, then, that hedge fund managers are increasing their bullish bets on oil—to almost 320 million barrels since mid-October, according to Kemp—and that investment banks are raising their price forecasts.

Goldman Sachs said last week it now expected Brent crude to average $63 per barrel in 2020, with West Texas Intermediate seen at $58.50 per barrel. The so-called long-term anchor price for Brent was set at $55 per barrel, with WTI pegged at $50 per barrel.

Then yesterday JP Morgan followed suit, raising its Brent crude forecast to $64.50 a barrel, up from $59 per barrel, and its WTI forecast to $60 per barrel. The bank even expects the oil market to swing into a deficit of some 200,000 bpd.

The thing to bear in mind, however, is that this optimism is fragile. Any piece of bad news regarding oil consumption in any of the top consumers and importers will pressure prices. So would any bad news about supply, as the latest API weekly inventory report proved yet again yesterday.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage




Leave a comment
  • Mamdouh Salameh on December 19 2019 said:
    Two major factors are currently contributing to the evident bullishness in the global oil market: the de-escalation of the trade war and the steep slowdown of US shale oil production. I didn’t add the so-called recent OPEC+ cuts because I named them the cuts that have never been. Therefore, they had no impact whatsoever on oil prices.

    China’s record-breaking crude oil imports hitting 11.8 million barrels a day (mbd) in November are the clearest indication that China’s economy is sturdy and that the fundamentals of the global oil market are positive and are being enhanced by the de-escalation of the trade war.

    However, the oil market should be wary of President Trump’s tendency to change his mind suddenly vis-a-vis the start of a reconciliation with China particularly in the aftermath of his impeachment. Still, China’s roaring oil imports could sustain the momentum of the oil price’s surge.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News