Extreme weather and geopolitics are seen to affect oil prices in 2020, according to a study by an independent research firm. This year, economic activity and ethanol pricing in the US were affected by flooding, which disrupted corn planting and harvesting. Meanwhile, in India, energy demand was hampered by the late monsoon.
The study believes the weather will have a more significant impact on energy commodity demand despite a brighter global economic outlook and the easing in the US-China trade tensions. Extreme heat and cold can impact energy demand. Economic growth and energy distribution also face challenges from hurricanes and typhoons.
Geopolitical risks are expected to remain elevated in 2020, with the US continuing maximum pressure on Iran. The report said that it is unlikely that the US would give any sanction reliefs on the Islamic republic before the presidential election in November.
Meanwhile, In the UK, Brexit will have an implication on the UK’s overall carbon price and the country’s participation in the EU Emissions Trading Scheme. The US-China trade war is expected to continue affecting the agricultural sector despite constructive talks.
The study expects oil prices to break above $65/barrel in March-May next year thanks to OPEC+ deeper supply curb and the implementation of IMO 2020. However, prices are seen to recede to around $60/barrel by the end of 2020. Meanwhile, WTI is likely to move above $60/barrel in early 2020 and then retreat to the high $50s/barrel.
