As we begin 2019, the energy markets and the stock markets are experiencing incredible volatility. Both underwent steep declines during the latter part of last year, but both are off to a fast start in the new year.
How might this all play out in 2019?
Below are my predictions for some of the significant energy trends I expect this year. As I often point out, the discussion behind the predictions is more important than the predictions themselves. That’s why I provide extensive background and reasoning behind the predictions.
I also provide predictions that are specific and measurable. At year’s end, there are specific metrics that will indicate whether a prediction was right or wrong.
- Oil prices will rise at least $25/bbl in 2019
Six months ago, when oil prices were pushing above $70/bbl, I was preparing to make a more conservative oil price prediction for 2019. I thought the price rise would slow heading into 2019, but what I didn’t foresee was the collapse in prices that took place in the second half of 2018.
That collapse in oil prices makes this prediction a lot easier. The price of West Texas Intermediate (WTI) closed the last day of 2018 at $45.15/bbl, after falling $30/bbl in the last three months of the year. Oil closed $15/bbl lower than it opened the year. Meanwhile, U.S. crude oil inventories are almost exactly where they were a year ago.
The difference is in the perception of where the oil market is going. Market bears foresee electric vehicles taking a larger bite out of oil consumption, and they see continued growth of U.S. oil production contributing to an oversupply of crude oil globally. They are also concerned about an economic slowdown.
OPEC is the wild card here. A big reason oil pri