- Live Heating Oil prices
- The US and their oil situation
- Oil from Russia
- Crude oil market outlook
- Oil Price Forecast 2025 and 2050
- Live Brent Oil prices
- Will OPEC rebalance the market?
- Follow our comprehensive chart to explore the US crude oil price in real time.
- IMO 2020: the biggest trigger of a massive crude oil market shake-up
- Who benefits from low oil prices and who’s disadvantaged?
- Will ESG initiatives be harmed because of this?
- Mixed output story
- Can oil go lower?
- What’s most important in determining the long-term breakeven price of oil?
- Cuts support prices
- The element of sanctions
- Advertising on OilPrice.com
- Crude oil price forecast 2020-2022
- Section 5: Conclusions
- WTI oil (Light)
Live Heating Oil prices
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The US and their oil situation
The US is net flat when it comes to the influence of oil prices on its balance of payments. It exports sweet light crude and imports heavy due to specialized refinery needs. They approximately balance out.
Shale is one of the most elastic (i.e., demand is sensitive to price) parts of the oil supply. Wells get exhausted quickly, so shale producers need to keep drilling to maintain output. If shale aggregate breakeven is about $40 per barrel, then going from $60 to $45 doesn’t mean as much as going from $45 to $30. In the case of the former, a shale producer is still profitable, in the latter production dries up with the economics being destroyed.
Oil from Russia
Urals Crude Oil — a mixture (a mixture of heavy and high-grade Urals oil, with light oil of Western Siberia, with an API density of approximately 32 and a sulfur content of about 1.2%), produced in the Khanty-Mansi Autonomous Okrug, Bashkortostan and Tatarstan. This oil is supplied via the Baku-Novorossiysk pipeline and the Druzhba pipeline system . The world’s largest Urals oil producers are Rosneft, LUKOIL, Gazprom Neft and Tatneft . Urals oil futures are listed on the Russian RTS stock exchange. On the new York Mercantile exchange NYMEX «Ural» it is known as REBCO and is traded under the Ticker symbol RE, in US dollars per barrel. The largest consumersn oil are Italy and Rotterdam, the Netherlands.
Crude oil market outlook
OPEC is expected to restrain oil production in 2020. The 14-member producer group lowered their numbers, because of “signs of stress in the global economy”. OPEC has revised their own crude oil production and expects a decline for the next five years from 35 million b/d in 2019 to 32.8 million b/d in 2024.
OPEC’s report came amid increasing concerns of many crude oil market participants about a repeat of rising supply and falling demand – the same as happened in mid-2014 when crude oil price experienced a huge fall.
Analysing the crude oil price trend for the nearest future, OPEC forecasts oil demand to continue at “healthy rates” over the next five years, expecting a rise of 6.1 million b/d compared to the level of 2018.
According to the International Energy Agency’s executive director Dr Fatih Birol, “The second wave of the US shale revolution is coming. It will see the United States account for 70 per cent of the rise in global oil production and some 75 per cent of the expansion in LNG trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy”.
On Tuesday, December 3, 2019 Brent crude traded at $60.78, while US WTI stood at $56.06.
Oil Price Forecast 2025 and 2050
The EIA predicted that, by 2025, Brent crude oil’s nominal price will rise to $66/b.
By 2030, world demand is seen driving Brent prices to $89/b. By 2040, prices are projected to be $132/b. By then, the cheap oil sources will have been exhausted, making it more expensive to extract oil. By 2050, oil prices will be $185/b, according to the EIA’s Annual Energy Outlook.
The EIA assumes that demand for petroleum flattens out as utilities rely more on natural gas and renewable energy. It also assumes the economy grows around 2% annually on average, while energy consumption decreases by 0.4% a year. The EIA also has predictions for other possible scenarios.
Live Brent Oil prices
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Will OPEC rebalance the market?
Clearly, most oil producers – oil exporting countries and oil producing private companies – want higher oil.
The US shale industry, which can turn production on and off much more quickly than longer-cycle projects, has established more control over the oil market globally over the past decade. Part of the calculus behind Russia and Saudi Arabia going their separate ways is a longer-term strategy to push out higher-cost producers. This includes US shale, which has less than stellar economics and often involves lots of borrowing to get projects online.
Many shale producers will need to declare bankruptcy. Many already have or are going to shortly. The US may also deem some of these projects to be strategic assets. The current US administration wants the country to not be dependent on foreign sources of energy, at least on a net basis. Widespread bankruptcies of key oil producers could undermine this objective.
If OPEC were to want to boost prices with cuts, it depends on two things:
(i) When do they cut?
(ii) How much do they cut?
Another important factor lies in the cost of production in the US and among other producers? It’s gone down pretty dramatically since 2014.
The cost of finding and development (F&D) was about $30 per barrel in 2015-16 and was $12 per barrel in 2018-19. If you isolate that variable econometrically, that tends to put WTI crude oil’s fair value in the mid-to-high $40s.
In terms of corporate cost structures, if you’re thinking of putting your money in companies with ~$60 per barrel breakeven prices, that’s probably not a good bet. It’s unlikely that companies, at least those that have a focus on upstream operations, can sustain themselves if they need $60 oil. (The average “oil services” company revenue mix is 60 percent upstream, 25 percent LNG/midstream, 5 percent downstream, and 10 percent other.)
If you want to get into natural gas, you will see a material number of bankruptcies if prices stay sub-1.90/sub-2.00 per MMBTU. It’s not just 2020 prices, but prices in the 2021 curve on out have gone this low as well.
Follow our comprehensive chart to explore the US crude oil price in real time.
US crude oil is one of the world’s most valuable commodities available for trade. Also known as West Texas Intermediate (WTI) or Texas light sweet, it is a popular investment tool used by international investors seeking true asset class diversification in their portfolio. The commodity is often seen as a hedge against any financial uncertainty, inflation, deflation or currency devaluation.
WTI is a benchmark that serves as a reference price for sellers and buyers of crude oil across the United States. Due to its relatively low density and low sulphur content, it is generally considered lighter and sweeter than Brent, making it ideal for gasoline refining.
According to the historical US crude oil chart, the commodity reached a record low of $11 in December 1998 and a record high of $147.27 in June 2008.
Stay up-to-date with the latest market news and watch the US crude oil spot price live at Capital.com.
US crude oil is a blend of several American streams of light sweet crude oils. It is sourced from several oil fields, including those in Texas, North Dakota and Louisiana, and refined in the Midwest and Gulf Coast regions. Cushing, Oklahoma, is the major trading hub for US crude oil.
Even though WTI is considered the highest-quality light sweet crude available, it is not the most used oil worldwide. This is due to the land-locked supply allocation, which makes its transportation around the globe more difficult and expensive than that of water-borne Brent.
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With regard to the price of US crude oil, the commodity has witnessed a lot of volatility throughout its history, hitting some dramatic peaks and bottoms.
For many decades, due to its unique properties, US crude oil had traded at a dollar or two premium to Brent and the OPEC basket. However, because of the following Shale Revolution in the early 2000s, when WTI production increased, and more imports to the US from Canada, the commodity has started trading at a discount against its major counterparts.
At the start of 1999, it stood as low as $12 a barrel. During the following years, it had climbed steadily until it reached its all-time high of more than $147 a barrel in mid-2008. However, the bullish trend reversed in the second half of the same year, with the crude oil spot price falling as low as $37.80 a barrel in early 2009.
In 2017, the average price for WTI crude oil stood at $50.84 per barrel; in 2018 – at around $67.22. As for 2019, the commodity ended the year at $61 a barrel.
In general, the US crude oil rate significantly relies on the wider performance of the US economy. In addition, as with any other traded commodity, its value depends on the basic laws of supply and demand. For example, when supplies are tight, you can expect the price of oil to rise.
IMO 2020: the biggest trigger of a massive crude oil market shake-up
Oil products markets are coming towards one of the biggest market shake ups in history, driven by the International Maritime Organisation’s new regulations. The new rules will govern bunker fuel quality in 2020.
The IMO 2020 regulation prohibits high sulphur fuel oil (HSFO) from the bunker pool. HSFO has been the main vessel fuel since the 1960s, so the transformation will be challenging.
In this case, many shipping companies will prefer to use marine gasoil (MGO) instead of a new very low sulphur fuel oil (VLSFO), until they feel confident in VLSFO availability, stability and compatibility with similar grades. Although refining and shipping industries have been warned about this beforehand, there remain fears of shortfalls after the new rules come into force.
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Who benefits from low oil prices and who’s disadvantaged?
At the macro level, do the oil consumers (there are more oil consumers than oil producers) increase spending as quickly as oil producers decrease their own spending (through less income and lower investment)? If this is true, the effects globally would theoretically net out.
Oil shocks can have adverse effects both ways. However, oil demand is famously inelastic in the short-run. In other words, over short time horizons, price doesn’t influence demand much.
Lower oil prices are felt more broadly while losses are more concentrated – i.e., among producers and oil exporters. Most economic participants – both individuals, companies, and countries – are buyers or consumers of oil. Few are producers. Holding all else equal, when oil declines, most economies benefit while the losses are concentrated among a few countries.
Will ESG initiatives be harmed because of this?
Some investors integrate environmental, social, and governance (ESG) factors into their research process. This is another side story to the oil price collapse. More environmentally-friendly technologies are still in their early stages and lack viability in the free market beyond limited use cases.
The cheapness of oil and related products will mean more investment in these products. In that sense, it is realistic to expect that longer-term sustainability and environmental goals could be pushed back to a degree when the free-market economic incentives further favor carbon-based products.
Public companies based on alternative energy products naturally have some sort of “oil price” effect built into their present values. For example, when the price of oil goes down, electric vehicles become less compelling given the cost of operating a gas vehicle falls.
Mixed output story
Last month, after intense negotiations with the UAE, OPEC+ agreed to boost output by 400,000 barrels per day each month from August. The move was intended to bring the group’s output back to its pre-pandemic level by the end of 2022.
Even so, oil prices have dipped this month, in large part over fears regarding the spread of the more contagious Delta variant of the coronavirus and resulting slow growth around the world, particularly in Asia where vaccination rates are generally low.
The story is mixed, though, by region.
Brent crude prices dropped 6% last week, its largest week of losses in four months, while WTI slumped nearly 7% in its biggest weekly decline in nine months, according to Reuters. Support was further weakened when the IEA said demand for crude oil ground to a halt in July and was set to rise at a slower pace over the rest of the year because of surging infections from the Delta variant.
But a weaker outlook hasn’t stopped the Biden administration from calling for an investigation into profiteering. Although Brent crude prices are up a third from the start of the year in July, retail gasoline prices in the U.S. were up some 41.8% compared with July 2020, according to the Labor Department quoted in a BBC post. The government fears rising gas prices could hamper the recovery.
Can oil go lower?
It can absolutely go lower from the mid-$20s if oil storage capacity is eventually tapped out and oil transportation is severely limited. This was the situation in 1998 when oil dropped to $10 per barrel.
Some traders assume that because a price hasn’t been breached before or in a very long time, that it means it’s unlikely to happen – i.e., a historical price level or whatnot. But that has nothing to do with the cause-effect relationships impacting the present.
Oil going down to the low double digits or even into the single digits is unlikely for now but not out of the realm of possibility. We are not personally betting on that happening (nor are we long oil), as the distribution of potential outcomes is still very high.
Over the long-run – i.e., out 5-10 years – oil should maintain a higher equilibrium price. But that’s already reflected in the futures curve.
The curve is steepest in the very beginning, expecting $30+ per barrel oil within a few months, followed by a long-term equilibrium of about $45.
In the near-term, we’re going to have high inventories simply because of how bleak the demand scenario is. Even if OPEC et al cuts production, there’s simply going to be more supply than demand simply because of how large of a hole has been blown in demand.
The stock market, which is a function of future expected cash flows and interest rates, is most likely to see a V-shaped recovery because of the nature of the equities market and how it prices in the future. And it now has rock-bottom interest rates to increase the present value of those future discounted cash flows and an unprecedented level of liquidity, which is still being dished out.
On the other hand, oil is effectively a supply and demand market. All that inventory is going to be like an anchor on oil prices. It has to be worked off. Thus, the recovery in price is likely to be U-shaped and predicting direction in the short-run is difficult.
Brent got Its name from the area of the same name on the shelves in the North sea, which belongs to great Britain. In this region, oil reserves have been significantly depleted and supplies to the nearest areas have slightly increased in price. However, Brent oil is still the benchmark for oil and serves as a benchmark for pricing other grades, the price of which differs somewhat from them by the spread of prices for different grades of oil. Brent oil is also a benchmark due to its wide availability and ability to continuously develop, as well as the possibility of including new brands. Today, up to two-thirds of the world’s oil reserves at a price relative to Brent, Brent is called sweet oil, which contains 0.37% sulfur and 38 density units. Brent crude oil is widely used for processing into gasoline and diesel fuel.
Brent is traded on the electronic Intercontinental Exchange (ICE) under the LCO Ticker in US dollars.
Although Brent is considered a light oil, it is not as light as WTI.
What’s most important in determining the long-term breakeven price of oil?
For many commodities, getting at the key driver that incentivizes production is important. When the sellers and producers in a market can’t sell their goods profitably, it dis-incentivizes production and supply becomes scarcer.
The cost of production is a big one, though different “breakeven points” have different influence.
For example, in the oil market, Saudi Arabia – as covered, a big producer with large influence over the market – the cost of production for a barrel of oil is under $5 (in US WTI terms). But that doesn’t mean it’s the best economic decision to produce as much oil as possible.
Saudi Arabia’s breakeven with respect to its budget (where it has neither a fiscal surplus nor a deficit) is around $70. But that’s also not quite as important because governments can run a deficit.
Saudi Arabia’s balance of payments breakeven WTI oil price is approximately $55. The current account breakeven is the most important of the three because it has the biggest impact on global capital flows.
Oil in the $40s or under for any extended duration requires Saudi Arabia to burn through its foreign currency reserves. It also constricts capital expenditure investments of oil producers. Moreover, if Saudi Arabia and OPEC+ can agree on production cuts to pull oil back up to their balance of payments breakeven, it makes sub-$40 oil unlikely for long periods of time because of how uneconomical it is.
Saudi Arabia is like the Federal Reserve of the oil market as over one third of OPEC’s production. So their motivations matter.
Global demand, once that recovers, will hang around just over 100 million barrels per day, though the growth rate in demand is slowing. Global capacity to produce is higher than that (though official production stats are somewhere around 81mm bpd globally, with about 38% from OPEC), and available supply is somewhat above 100mm bpd.
Price is skewed down due to falling demand/slowing growth and ample production capacity. Higher USD – another knock-on effect of the coronavirus crash (from people owing obligations in dollars and lacking funding) – has had an effect as well.
Securing storage, logistics, and transportation capacity involves needing US dollars. This was a similar concern during the 2008-09 fall in oil.
The Fed offering international swap lines and backstopping various forms of credit helps. Nonetheless, oil, because of its relevance in global trade, creates dollar liquidity on its own. A further drop in oil prices can exacerbate and create additional dollar shortages globally.
Cuts support prices
In such a dystopian world, demand for oil seemed likely to collapse. Predictions for crude oil prices were as downbeat as those for the economy as a whole.
In the background, two big producers, Russia and Saudi Arabia, seemed to be pumping huge amounts of oil in order to put the other out of business, a risky strategy at a time when demand was falling.
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However, both sides buried the hatchet in the spring and helped put together a package of production cuts to bolster prices. OPEC, led by Saudi Arabia, joined forces with the 10 countries in the “NOPEC” group led by Russia to agree to take about 10 per cent out of total production, about 10 million barrels a day.
As intended, this has had a supportive effect on prices. One month ago, on 28 July, Brent had recovered to $43.25 a barrel, and WTI to $42.83. At the time of writing, Brent is 0.69 per cent up on its previous close, at $45.44 a barrel, while WTI is down 0.29 per cent at $42.83.
In making crude oil prices predictions, the key question is whether this modest recovery can be maintained. That, in turn, raises a number of other questions relevant to predictions for crude oil prices.
One is the likely health of the world economy. Without a sustained recovery from the lockdown induced recession, demand for oil will slump once more and we could be back in the situation seen in April when prices actually turned negative.
Crude oil prices now seem to be bolstered by a general feeling that even if there is to be a “second spike” of the virus later this year, most major economies are unlikely to return to full lockdown. That, in turn, should help the world economy back on its feet.
The element of sanctions
On top of that, the Russians also have to consider US sanctions on Russian oil assets (Rosneft and the Nord Stream 2 pipeline) into the equation. Sanctions have become a common tool that the US leverages to conduct its foreign policy. US shale oil has helped them exert this power as they are not dependent on foreign oil, on net. The fact that the US imposed sanctions on the Nord Stream 2 pipeline, an $11 billion project, just as the pipeline neared completion has to be a major source of frustration for the Russians.
Russian President Vladimir Putin has used sanctions to strengthen his relationship with China. Saudi Arabia is a US ally and the relationship has remained intact. But this period could test the cooperation between the two.
Thirteen Republican Senators reach out to Saudi Arabia’s energy minister asserting that the US’s strategic partnership with the kingdom could be damaged if they don’t address the oil market.
President Trump has been notably in favor of lower oil prices. It saves consumers money, gives them more disposable income, and is this is all correlated with the support of political administrations. The 2020 US presidential election has heavily come down to the handling of the virus and restoring economic opportunities.
However, he is concerned about the effect this will have on the economics of US oil production and the damage to the US oil industry. Trump threatened to impose tariffs on crude imports if it means protecting US energy workers from an oil supply glut from producers such as Saudi Arabia.
Low oil prices also create dollar squeezes globally from some countries being unable to meet their obligations (and requiring new borrowing). The increase in the dollar can tighten monetary policy at home and be a drag on the US recovery.
This has pushed his administration and some members of Congress to encourage Saudi Arabia and Russia back to some state of cooperation on restraining production.
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Crude oil price forecast 2020-2022
According to the McKinsey & Company’s Global Supply and Demand Outlook, if OPEC+ keeps control over production levels and crude oil demand growth stays healthy, we can expect crude oil prices to hover in the range of $60-$70 in 2020.
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According to the EIA’s latest crude oil price forecast, Brent crude oil prices are expected to average at $60/b in 2020, which is down from the average of $64/b in 2019. Giving its prediction for WTI crude oil prices in 2020, EIA forecasts WTI prices to average $5.50/b less than Brent prices in 2020. The EIA expects crude oil prices to be lower in 2020 than in 2019, due to the rising global oil inventories.
Meanwhile, on Tuesday, December 3, 2019, prices were rising on the optimistic crude oil price news that OPEC and allies will finally conclude a deal on further oil production cuts to support a fragile oil market and prevent an oversupply next year amid the ongoing trade war and increased oil production in the US.
The World Bank also builds a very positive crude oil price forecast graph, anticipating that all three major benchmarks, including WTI, Brent, and Dubai Crude continue to move up after 2020 to reach over $100 per barrel on average by 2025.
Providing a long-term crude oil price prediction, Walletinvestor expects the WTI crude oil price to grow around +46.01 per cent up to $81.603 in a five-year period.
What needs to happen for the price to reach $100 per barrel again? Watch a short video by Capital.com Chief Market Strategist David Jones, who makes a detailed crude oil price and forecast analysis, to better understand whether crude oil has a chance to reach the $100 milestone ever again.
Section 5: Conclusions
Peak oil demand is all the rage.
The prospect that global oil demand will gradually slow and eventually peak has created a cottage industry of executives and commentators trying to predict the point at which demand will peak. This focus seems misplaced. The date at which oil demand will stop growing is highly uncertain and small changes in assumptions can lead to vastly different estimates. More importantly, there is little reason to believe that once it does peak, that oil demand will fall sharply. The world is likely to demand large quantities of oil for many decades to come.
Rather, the significance of peak oil is that it signals a shift in paradigm – from an age of (perceived) scarcity to an age of abundance – and with it is likely to herald a shift to a more competitive market environment. This change in paradigm is also likely to pose material challenges for oil producing economies as they try both to ensure that their oil is produced and consumed, and at the same time diversify their economies fit for a world in which they can no longer rely on oil revenues to provide their main source of revenue for the indefinite future.
The extent and pace of this diversification is likely to have an important bearing on oil prices over the next 20 or 30 years. It seems likely that many low-cost producers will delay the pace at which they adopt a more competitive “higher volume, lower price” strategy until they have made material progress in reforming their economies. More generally, it seems unlikely that oil prices will stabilise around a level in which many of the world’s major oil producing economies are running large and persistent fiscal deficits. As such, the average level of oil prices over the next few decades is likely to depend more on developments in the social cost of production across the major oil producing economies than on the physical cost of extraction.
Group chief economist, bp
Director of The Oxford Institute for Energy Studies
WTI oil (Light)
West Texas Intermediate (WTI) otherwise known as Texas Light Sweet and shipped from Texas and Mexico. This oil contains a small amount of sulfur and density. The sulfur content is about 0.24%, and the density is 39.6 units, and this oil is considered sweet and light oil. Refining of this oil is usually done in the Persian Gulf regions, as well as the United States due to the closest location to oil reserves. Light Sweet Crude Oil (WTI) is traded on the NYMEX under the Ticker CL. WTI crude oil is traded in the form of futures and options, which is a tool for high liquidity trading on commodity exchanges.