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Bank of America Eyes Oil at $70 in 2019

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Nov. 20 2020, Updated 5:27 p.m. ET

Bank of America eyes oil at $70

Bank of America Merrill Lynch (BAC) expects Brent crude oil to average ~$70 per barrel in 2019, according to a CNBC report. The OPEC and non-OPEC agreement to cut 1.2 MMbpd (million barrels per day) of oil from the October production level in 2019 would be the key driver for US crude oil prices going forward.

So far in 2018, Brent crude oil active futures have fallen 10%. Concerns about global economic growth and how US sanctions on Iran will impact crude oil exports are the key factors that might determine oil’s future movement.

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Was the oil market impacted by the cuts?

US crude oil production has been at a record level in the past few weeks—a factor that usually causes WTI to underperform Brent crude oil prices. During OPEC’s meeting and after the production cut announcement, the Brent-WTI spread didn’t witness sharp movement—unlike the last time. US crude oil prices gave up all of their gains from the OPEC and non-OPEC deal on December 7  in the next trading session after the announcement on December 10.

Oil prices and US equity indexes

US equity indexes like the S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the S&P Mid-Cap 400 (IVOO) can be influenced by changes in oil prices. The Energy Select Sector SPDR ETF (XLE), which includes energy stocks that are sensitive to oil, can also react to any changes in oil prices.

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