Top 5 Factors Affecting Crude Oil Prices in 2020


There has been on a steady fall recently on demand concerns, as there are five major factors that are affecting crude oil prices in 2020.

12 February 2020 | HYCM – On February 11, I was speaking on CNBC Arabia about the top 5 factors currently influencing crude oil prices. Oil has steadily declined recently on demand concerns. However, there are a number of factors affecting oil prices that you should know.

Related: 3 Factors That Could Support Crude Oil Price In The Medium Term

5 major factors driving crude oil prices

Below, are the top five factors, so that you can get a handle on oil in a hurry.

  1. The first issue with oil is that the market is, or rather, can be easily oversupplied. OPEC+ has helped keep oil markets price supported through 2019 by agreeing to production cuts
  2. OPEC+ is waiting on Russia to see if they agree to the proposed 600K production cuts. Russia needs US crude to be at around $40 to balance their books, so they are not overly alarmed at current US crude prices around $50. However, Saudi need oil closer to the $80 mark, so they are incentivized to cut production. In fact, production levels for January have been at historic low levels from OPEC suppliers
  3. Libya. The shutdown of ports in the East of Libya has really hit supply. Linya is producing around 180K barrels per day vs a normal production level of 1.2 million barrels per day. So, watch out. The Libyan crisis is currently supporting oil prices, so if the ports suddenly open then oil will fall sharply as they factor in the large inflows.
  4. Coronavirus demand issues. The longer and worse the coronavirus outbreak gets, the worse this is for oil prices. China is the world’s largest importer of oil at around 11 million barrels per day. The analysis that I have been reading puts China oil demand falling between 1-3 million barrels per day. So, that could be around a 20% fall in Chinese oil demand, possibly slightly more.
  5. The IEA and OPEC oil reports are both out this week. It will be interesting to see how they project oil demand being impacted by the coronavirus, so watch out for some potential oil wobbles as those headlines come out.

Takeaway for investors

There you have it. Do check the headlines as they come out so that you can weigh them up against these 5 factors affecting oil. Trading oil is really like a puzzle at the moment. So just make sure you know how each piece is lining up before making your moves.

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