2019 was an eventful year for the oil and gas industry. The ongoing US-China tensions, disrupting political situations including the U.S. election cycle, the continued pressure on the industry to act on climate change, as well as the weakening economic growth, not only in the United States but also in Europe and China have brought significant shifts in the oil market last year.
Let’s take a look at the key factors that can move this market in 2020.
1. Slowing demand growth
The global economy will play an important role in the oil market in the upcoming year. As we have seen, Oil demand has struggled in 2019 as the US-China trade war threatened to derail a decade-old economic expansion. Although expansion is still going, with an average close to 100m barrels a day for the first time, analysts predict an annual rate of growth of below 1 per cent for the first time since prices collapsed in 2014
Opec and allies such as Russia (Opec+) have been fighting a fierce war against U.S. shale since 2016, and at the start of December, they made another cut to production in an attempt to stop the market from becoming overwhelmed by new supplies in the first half of 2020. They have been relatively successful at increasing prices near $60 a barrel, but few expect them to be able to push crude significantly higher.
Opec’s analysts are forecasting that next year the market will be relatively balanced, at least if they keep the cuts in place — and maintaining the balance of supply and demand will be tighter in the second half of the year than in the first, especially if U.S. shale production slows
3. Climate Change
With increasing global awareness of the threat of climate change and the pro-environmental behaviors, expectations are growing that the largest Oil producers may need to accelerate into the energy transition. For the big European oil producers, this is pushing them to find cleaner business lines and think seriously about the future of the planet.
Becoming more sustainable is also expected to be a major trend in oil and gas for the upcoming years, with analysts predicting the 2020s could be the decade when oil consumption finally peaks.