The oil market’s biggest nightmare briefly came true in 2019 – an attack that knocked out more than half of all production in Saudi Arabia, the world’s biggest crude exporter. But in little more than a week, oil prices were back to where they started. That was partly because of a quicker than expected recovery of the kingdom’s facilities, but also because traders said that fears of oil shortages were hard to sustain in the era of US shale. They might have a point. Crude prices started 2019 near $60 a barrel and look set to finish the year at roughly that level. The market has taken almost everything thrown at it in its stride.
But will 2020 prove to be another uncommonly placid year in crude, with volatility calmed by the US oil juggernaut? The history of the oil market suggests that outcome is unlikely, with periods of complacency quickly giving way to heightened volatility. Already traders and analysts are arguing over whether US shale can really keep growing and, if not, how the oil market might react. Here are five things to watch in the oil market in 2020.
US oil production continues to climb
The outlook for US shale will most likely be the biggest single oil specific factor to decide crude’s path next year. The sector has shown tremendous growth in recent years, heaping pressure on Opec as supplies have expanded faster than demand.