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2020 Oil and Gas Outlook

Posted December 31, 2019 in Articles

It’s time for our annual look at the forecast for the oil and gas industry for the upcoming year. Here is what the U.S. Energy Information Administration (EIA) and other forecasters are predicting for 2020:

1. Oil and Gas Prices Will Continue Their Downward Slide

After oil and gas prices across most major indices peaked in 2018, they dropped in 2019, and the EIA expects that they will continue to drop further in 2020 (though not to pre-2018 levels). For example, while WTI Crude Oil topped out at $65.06 in 2018, it dropped to $56.74 in 2019, and the EIA is currently estimating 2020’s average price at $55.01. The trend and forecast are similar for Brent Crude Oil and gasoline, and the EIA expects diesel to remain substantially stable from 2019 into 2020 (rising just three cents from $3.06 to $3.09).

2. Global Oil Inventories Will Rise in 2020 Despite OPEC’s Continued Production Cuts

The EIA attributes its 2020 forecast to the current global inventory, which is continuing to outsize demand. As reported by the EIA, the expectation is that, “crude oil prices will be lower on average in 2020 than in 2019 because of forecast rising global oil inventories, particularly in the first half of next year.” This is despite the fact that OPEC and various other oil-producing entities have announced plans to enhance the production cuts that they first implemented in 2018. In its announcement, OPEC also confirmed its prior estimate of oil demand increasing by 1.1 million barrels per day in 2020, and noted that, “in recent months expectations for non-OPEC supply have been revised downwards.”

3. A Stable Rig Count Will Belie Financial Turmoil and Industry Shakeup

In an article titled, 7 Things to Expect from the Oil and Gas Industry in 2020, anticipates that, “[t]he domestic rig count will be largely stable, at least through the first six months of the year.” However, the article goes on to forecast an increase in the number of bankruptcy filings among small and mid-size oil producers, and it suggests that this may led to an increase in merger-and-acquisition activity throughout 2020.

4. U.S. Oil and Gas Exports Will Continue to Play a Larger Role in the Global Market

Citing the EIA, the article also forecasts a continued increase in the export of liquid natural gas (LNG) out of the United States in 2020. With regard to crude oil, the article references the U.S.’s achievement of becoming a net exporter in September 2019 and suggests that, “we can expect more of the same in 2020 as production and export capacity at various Gulf Coast port facilities continue to rise.”

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