Outlook: Higher Prices
Oil prices are probably headed higher in 2019.
OPEC surprised a lot of people last week by agreeing with Russia to cut a total of 1.2 million BPD of oil from the market. The last time OPEC announced a major cooperation agreement with Russia, oil prices rallied once it became apparent that the group was sticking to its agreement.
I expect similar results this time. Jointly, OPEC and Russia produce more than 50% of the world’s oil. They have significant pricing power if they manage to maintain discipline. I expect they will do so given the positive results from the previous production cuts, and therefore I expect the price of oil to recover back above $60/bbl early in 2019.
But the oil markets still have the Trump wildcard to contend with. As long as he is committed to lower oil prices, he will continue to cajole and coerce Saudi Arabia for more oil production.
Perhaps it’s time for him to rethink whether that’s such a good idea.