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Trafigura: Oil Prices Will Rise to $70 in 2020

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US crude oil

On March 25, US crude oil prices fell 0.4% and settled at $58.82 per barrel. Concerns about global economic growth might have dragged oil prices. On March 18–25, US crude oil futures fell 0.9%

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Will oil prices rise to $70 in 2020?

Trafigura, a commodity trading firm, expects Brent crude oil to trade above $70 per barrel in 2020. OPEC’s supply cuts and US sanctions on Venezuela this year will be the key factors for oil’s rise. The firm is concerned about weaker macro factors that might not help oil extend its gains to a larger extent despite tighter supply in the second half of the year. However, if the US economy falls into a recessionary phase, the current supply cuts might not help Brent crude oil sustain even at $60. On March 25, Brent crude oil active futures closed at $67.21 per barrel.

The risk is from weaker macro factors and US oil exports. In recent U.S. Energy Information Administration data, we saw an increase in US crude oil exports. In the week ending March 15, US oil exports have risen by approximately one million barrels per day from November 2018, which is ~83% of OPEC and non-OPEC members’ pledged output cut.

The S&P 500 Index (SPY), the Dow Jones Industrial Average (DIA), and the S&P Mid-Cap 400 (IVOO) might be impacted by any short-term changes in oil prices due to their exposure to the energy sector. Upstream energy stocks like ConocoPhillips (COP), Chesapeake Energy (CHK), and Occidental Petroleum (OXY) will likely be impacted by any changes in oil prices.

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