However, the current Iraq skirmish is dismissed as irrelevant to crude: File Image/PixaBay
Even though early crude trading on Tuesday indicated a downward trajectory that continued throughout the session, it has been confirmed that both benchmarks have rallied substantially in 2019, with both West Texas Intermediate and Brent logging 35 percent gains for the year.
However, analysts are divided as to where the crude market will go in 2020.
On the optimistic side is Helima Croft, global head of commodity strategy at RBC Capital Markets, who on Tuesday pointed out that an an improving macro outlook should continue to boost prices: "The fact that the trade war is not dominating the headlines, the fact that people see light at the end of the tunnel, that's a really important story for oil right now because the macro story was really holding oil back."
Bart Melek, head of global commodity strategy, TD Bank
The market is looking past the Iraq developments at this stage
Croft added that demand from China is better than expected and a "really positive catalyst for oil."
Francisco Blanch, head of commodities and derivatives research at Bank of America, is similarly hopeful for a solid 2020: he noted that a "more accommodating Fed, rising U.S. inflation, improving global growth conditions...and low oil inventories" should support prices.
He also forecast global demand reaching 1.08 million barrels per day (bpd) in the New Year, compared to 0.93 million bpd in 2019.
On a more cautious note, Warren Pies, energy strategist at Ned Davis Research, said that while he too is "officially bullish on crude oil" due to rising long and short term trends, the bull case is weakening and attention should be paid to inventory reports.
As for Tuesday's storming of the U.S. Embassy complex in Baghdad by Iraq militiamen in retaliation to American airstrikes against an Iran-backed force, Bart Melek, head of global commodity strategy at TD Bank, said, "The market is looking past the Iraq developments at this stage, as it is unlikely there will be an impact on supply in the near term.
"Any attempt by Iran to disrupt Iraq supply is not a factor at this time."
Meanwhile, some events in 2019 will impact the crude market in the distant future, case in point: Saudi Arabia's economy shrank 0.5 percent in the third quarter, which analysts expected as the kingdom undertook its long-range plan to wean itself off the commodity and began focusing on growth in non-oil sectors.
Tuesday saw WTI settling down 62 cents to $61.06 per barrel, while Brent settled down 67 cents to $66.00 per barrel.