Hart Energy: 

We are continuing our look at the end of year trends. Taking a look at markets with Joe Markman, Senior Editor, Hart Energy. Joe, what did you see this year versus previous years?

Joe Markman: 

It is a little bit different this year. If you remember back to fourth-quarter 2018, crude oil prices/WTI started at about $75 at the beginning of October. By the end of December, it was around $45. Coming into this year, we didn’t really know what was going to happen. What we saw was the price started at $45 at the beginning of January. But then six days into the trading year, the price went up above $50 and for the first 10 or so months, it has not gone below. It did go above $60 beginning in March, hit a peak of $66 in April and then it went down below in May. Except for three days in July and one day in September, it hasn’t gone above $60 again. So what we see is for 80% of the trading days in the first 10 months of the year the price has closed in the $50s every day. That is actually somewhat stable as oil prices go. But when you are talking about volatility in 2019 you are really talking about the world outside the markets because it’s gone crazy. You have had a drone or missile strike on a Saudi oil facility. Now, 20 years ago that would have sent oil prices skyrocketing. You’ve also got a situation in the Middle East in the Persian Gulf. The Trump Administration has put increased sanctions on Iran. There is extra tension and upward pressure there. You have had oil tankers being seized by Iran, by the United Kingdom. Then you have the country of Venezuela. It’s a major oil producer but it has been imploding this year. Its economy is collapsed. You’ve got quite a bit geopolitically giving upward pressure to prices. Then again you’ve got the downward pressure and it starts with the U.S. shale boom. There has been such great output, particularly from the Permian Basin. Storage levels have gone up to the point where even when there are these events, like in Saudi Arabia. The prices have seen small spikes but it hasn’t really gone up much and that is because the traders know there is just so much oil in storage that there really isn’t a concern about running out. Another situation that has weighed on traders this year is the global economy. Then there is China. Aside from the trade war, you have a situation wherein October, Chinese factories had decreased their output for six straight months. That is a sign of a weakened global economy. A weakened global economy not growing as fast means they need less oil. That is one of the things that traders have been thinking about. That demand will be lower in the future. That is more downward pressure on oil prices. 

Hart Energy:

What are your final thoughts as we wrap up our look at markets in 2019?

Joe Markman: 


One of the things was when the White House announced there could be a resolution to the trade war with China, the equity markets reacted very strongly but the commodity markets did not. They did not move very much at all. They are taking a wait and see approach. So we will wait and see what happens next year. 
 

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