Oil price rise muted despite sanctions, supply cuts, attack in Saudi

NEW YORK/SINGAPORE: Oil prices rose more than 20% this year but there were no sharp spikes and crude futures barely sniffed US$70 (RM289) a barrel despite attacks on the world’s biggest oil producer, sanctions that crippled crude exports of two Opec members and gigantic supply cuts from big oil producing countries.

The price gains in crude oil benchmarks were all in the first quarter of 2019, even as the next several months featured supply shocks that in the past would probably have propelled crude past the US$100 mark.

Prices are likely to remain range bound in 2020 as swelling supplies, particularly from the United States, offset cuts from the Organisation of the Petroleum Exporting Countries and weakening worldwide demand, brokers and analysts said.

US crude oil is on track to end 2019 roughly 35% higher. Since the end of March, it is up just 3%, after rallying early in the year after the United States introduced sanctions on Venezuela.

Brent has gained 26% but is off by 1% since the first quarter.

Investors and analysts say US production and weak demand kept prices under control.

The United States is on track to be a net petroleum exporter on an annual basis for the first time in 2020. Output is expected to average 13.2 million bpd, an increase of nearly a million bpd from 2019.

Investor concern over peak oil demand is expected to weigh on prices next year, particularly as the urgency around action against climate change has increased.

Also, a long-term resolution of the US-China trade war seems elusive, keeping market watchers wary of predicting energy demand growth in the world’s two largest economies.

The US Energy Information Administration expects average crude oil prices will be lower in 2020 than in 2019 because of rising inventories. Outside the US production is expected to continue to grow in Brazil, Norway, and Guyana.

Prices did spike but only briefly after attacks on Saudi Arabia’s biggest oil facility and US sanctions on Venezuela and Iran.

September attacks on Aramco facilities briefly pushed Brent above US$72 a barrel but within 10 days oil prices sank back as Aramco brought production back online.

Notably, the market barely wavered in its view of where prices would end up. – Reuters