Crude Oil

Prices: The front-month futures price for Brent crude oil settled at $65.37 per barrel (b) on January 9, 2020, an increase of $4.45/b from December 2, 2019. The front-month futures price for West Texas Intermediate (WTI) crude oil for delivery at Cushing, Oklahoma, increased by $3.60/b during the same period, settling at $59.56/b on January 9 (Figure 1).

Crude oil prices rose steadily throughout December, with Brent experiencing only six trading days with day-on-day declines—the fewest of any month in 2019. EIA attributes this upward price pressure to a combination of intensifying geopolitical risks, the expected implementation of the Organization of the Petroleum Exporting Countries (OPEC) production cuts, and improved macroeconomic conditions. For example, crude oil prices increased following the January 3, 2020, U.S. military operation in Iraq, likely reflecting an increase in geopolitical risk. The front-month Brent price rose to more than $70/b during intraday trading for short periods during each day from January 5 to January 7, a level not seen since the September 14 attack on Saudi Aramco facilities at Abqaiq and Khurais. Previously, on December 6, 2019 OPEC members and Russia had agreed to deepen their existing production cuts by a further 500,000 barrels per day (b/d) starting on January 1, 2020. EIA assumes that OPEC will limit production through all of 2020 and 2021 to maintain relatively balanced global oil markets. Finally, demand side pressures may have contributed to the rise in crude oil prices. The conclusion of phase one of a trade deal between the United States and China to be signed on January 15, as well as improved macroeconomic indicators such as the Atlanta Federal Reserve’s GDPNow forecast and the Blue Chip Economic Indicators survey suggest an improved economic outlook.