Speaking at the Marine Money London Ship Finance Forum, Rystad Energy partner Markus Naevestad explained the key drivers that drove the crude oil price in 2018 and which still influence the price today.
The first key driver occurred in March 2018 when the OECD commercial oil stocks went below the five-year average, which, in Mr Naevestad’s opinion “was a signal to OPEC to start producing more crude oil.”
This was followed by the re-imposition of US sanctions on Iran announced in May 2018 which spooked the market, but did not come into force until later in the year.
June 2018 witnessed OPEC deciding to increase crude oil production followed by the expectation that the US would cut crude oil production.
But in October 2018, the EIA announced US crude oil production and stocks had reached an all time high, which was followed by Saudi Arabia’s announcement that it too had increased production with the combined impact of an extra 2M b/d into the market.
Together with the announced OPEC+ cuts in December falling short of market expectations, according to Mr Naevestad, was the final driver that pushed the crude oil price to US$50 bbl.
Taking into account the impact of US sanctions on Iran, IMO 2020 fuel demand, increases in refinery capacity and other factors, Rystad Energy projects that the Brent crude oil price will hover in the range of US$60 to US$70/bbl, with a finite price of US$65/bbl in 2019 and US$70/bbl in 2020.