Crude Market Fireworks for 2019

The international crude oil market has suddenly become volatile than at any time in the past five years.

Prices are see-sawing faster even than they did at the height of the 2014-15 price crash, regularly jumping or crashing by $2 3/bbl in a day. Brent crude prices fell 21% from $64 before Christmas in 2018. Then they recovered almost all of that in the first 10 days of January.

These are huge price swings for oil, without any apparent underlying news or fundamentals price driver.

In this insight article, published in CITAC Sub-Saharan Africa Oil Market Report, we examine the factors that have created this exceptional volatility:

•  the possibility of an end to the US-China trade war;
• OPEC’s renewed attempt to bolster the market;
• the political future of Iran and Venezuela; and
• the state of the global economy – in particular the state of the Chinese economy.

We also take a hard look at the economics of oil supply and demand for 2019 – and the possibility that while prices have bounced from their year-end low, the risk of global demand weakness coupled with surging US shale oil supply pose a big risk to bullish hopes – and will ensure volatility continues for much of this year.

Neill Fleming, CITAC Associate Consultant – January 2019