OIL WEEK AHEAD: Davos’ Explosive Mix

The months ahead could see a further decline in oil prices with proper recovery not settling in until 2021.

The World Economic Forum in Davos usually provides ample headlines for the oil industry, but this year one strategic player will be absent. Russia’s president Vladimir Putin plans on staying at home to see through a constitutional shake-up he launched in January designed to keep him in power after the 2024 election. Instead, he is expected to send an aide to represent him in sideline talks with other major oil producers.

Davos is more likely to turn again into a PR battle ground on climate change as environmental lobbyists make a stand against major oil firms which will also be present. Activist Greta Thunberg is already on her way to Switzerland for a pre-Davos protest on Sunday and other events are scheduled later in the week.

For CEOs of oil majors who will also be gathering in the Swiss ski resort, apart from the climate change headache, another issue will be trying to gauge if global economic growth will be strong enough to generate momentum in oil demand this year or whether prices more likely to stall at the current level.

President Trump will also attend the Forum while Iran’s foreign minister cancelled his trip.

Despite the tumultuous start to the year with the flare up of tensions between Iran and the US, the bounce in prices proved to be short-lived. If anything, the months ahead could see a further decline in oil prices with proper recovery not settling in until 2021. In its latest report, the US Energy Information Agency forecast Brent crude spot prices to average $65/bbl this year and to rise only slightly in 2021 to $68. It pegged WTI on average at $59 in 2020 and at $62 in 2021.

 

When

What

Why is it important?

Monday 20 Jan, 01.30

PBoC rate decision

PBoC launched a new easing cycle in November

Monday 20 Jan, 01.30

US Martin Luther King day

Nasdaq, NYSE closed

Tuesday 21 Jan

World Economic Forum Davos till 24 Jan

Oil issues will be discussed on the sidelines of the Forum

Tuesday 21 Jan, 10.00

German ZEW Economic Sentiment

Last at 10.7

Tuesday 21 Jan, 10.00

Eurozone ZEW Economic Sentiment

Last at 11.2

Wednesday 22 Jan, 15.00

US existing home sales

Last up 5.35m

Wednesday 22 Jan, 21.00

API weekly crude oil stocks

Last 1.1m

Thursday 23 Jan, 13.30

US initial jobless claims

Strength of the US job market

Thursday 23 Jan, 16.00

EIA US crude oil stocks

Last declined by 2.549 m bbl

Friday 24 Jan, 08.30

Germany manufacturing PMI

Expected to still be shrinking. Last at 43.7

Friday 24 Jan, 09.00

EU manufacturing PMI

Last at 46.3

Friday 24 Jan, 14.45

US manufacturing PMI

Buoyant in contrast to Europe, last at 52.4

Friday 24 Jan, 18.00

Baker Hughes US oil rig count

Friday 24 Jan, 20.30

CTFC oil net positions

Changes in money managers’ open positions

Is US oil output really slowing down?

The latest data from the EIA is also showing that the rapid growth of US oil production, which at one point in 2019 reached over 21% per annum, is finally running out of steam. The agency now forecasts growth of only 4.5% year-on-year in the first quarter of 2020, dropping to 4.1% in the fourth quarter. However, it is far too soon to write off US shale oil growth; it is just that the pace of growth will be slower than before. Domestic economic growth continues at a good pace, as does demand from transport and from industry. Also, for the first time, the US is about to establish itself as a net exporter of crude during 2020. US trade data, particularly data from the US Department of Energy Statistics Office, may be a better indicator of this trend over the coming months than the weekly EIA and API crude oil stock updates.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.