• Signs of slowing US shale oil growth in 2020


    ​David Shephard from London​

    The worst nightmare of the oil market took place briefly in 2019, the attack that stopped more than half of total production in Saudi Arabia, the world's largest crude oil exporter.
    But in just over a week, oil prices are back where they started. This is partly due to a faster-than-expected Saudi facility recovery, but also because traders see difficulty in continuing the concerns of oil shortages in the era of shale oil in the United States.​
    ​But will 2020 prove to be another unusually quiet year for crude oil, with volatility calming by the tremendous power of US oil? The history of the oil market indicates that this outcome is unlikely because leniency times quickly give way to extreme fluctuations. Traders and analysts are already arguing over whether US shale oil can actually continue to grow, and if not, how the oil market will react.​
    Here are five things to watch in the oil market in 2020:​
    First, American shale oil. The prospect of US shale oil is likely to be the single largest private factor driving the course of crude oil next year.​
    The sector has shown tremendous growth in recent years, increasing pressure on OPEC as supplies expand faster than demand.
    But there are signs that shale oil growth may slow or ultimately reverse in 2020. Small, independent firms that still dominate the sector are finding it increasingly difficult to raise money and are struggling to generate a continuous positive free cash flow.
    According to estimates by research firm Rystad Energy, shale oil investment has fallen 6 percent this year to $ 129 billion and expects a further 11 percent drop in 2020, although it still expects production to increase slightly.
    Chris Midgley, "S & P Global Platts" S & P Global Platts, believes that "oil shale activity the US is slowing while drilling companies retain focus on the discipline of capital."​

    Second, demand growth slowed. The oil trump card may be the power of the global economy. Demand for oil struggled in 2019 due to the threat of a trade war between the United States and China to hinder a decade-old economic expansion. But it is still expanding, and averaging nearly 100 million barrels per day for the first time, but analysts expect an annual growth rate of less than 1 percent for the first time since the price collapse in 2014.​
    Stephen Brinok said, an analyst at "B in the M Oil Associates," PVM Oil Associates: "image of oil demand for next year, and to a large extent price expectations depend on global economic growth and recovery."

    Third, OPEC and its allies. OPEC and its allies, such as Russia, have been on the defensive against US shale oil since 2016, and at the beginning of December cut production in an attempt to prevent the market from being overshadowed by new supplies in the first half of next year. And it managed to support prices relatively close to $ 60 a barrel.
    The expectations of OPEC analysts indicate that the market in the next year will be relatively balanced, at least if the organization maintains the cuts, and this suggests that the balance in supply and demand will be accurate in the second half of the year, compared to the first half, especially if shale oil production slows in United State.
    "OPEC" expects that the demand for crude oil from the Organization's countries will be about 29.6 million barrels per day in the next year, which corresponds roughly to what the recent cuts indicate is the quantity that will be pumped, with a lot of Iranian and Venezuelan oil leaving the market due to the US sanctions.
    Analysts said, "Goldman Sachs": "By focusing on short-term physical imbalances, the OPEC allies are targeting the narrow physical markets."​

    Fourth, the presidential elections in the United States. For the oil market, the 2020 US presidential election is actually about one man: Donald Trump​
    The Supreme Leader of Twitter made low oil prices a key part of his economic plan for voters, and in the past, he was not careful about launching large-scale attacks through his Twitter tweets against OPEC, if he believed the group allowed prices to rise above the limit.
    Fifth, the environment. This was the year when investors began, at least in the developed world, to behave seriously about climate change.​
    ​For the largest European oil-producing companies, this prompts them to try to find cleaner business lines and serious thinking in the future. The fear is that banks may start treating them like coal mines, which involves restricting access to capital.
    With their stock prices suffering, despite paying abundant stock dividends, expectations are growing that large oil companies may need to accelerate the energy transition. Will 2020 be that year?
    Expectations that environmental trends will gain more momentum spread throughout the industry, and some analysts expect that the third decade of the Millennium may be the decade in which oil consumption finally reaches its peak.​

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