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  HOME | Oil, Mining & Energy (Click here for more)

Oil and Gold Face Uncertainty Next Year

MADRID – Oil and gold prices will remain changeable in 2020, like the rest of the financial and commodity markets, amid two major uncertain factors that dominated 2019: trade tensions and a deceleration of the world economy.

In the case of oil, the revision of demand has been greatly influenced by geopolitical factors, such as the growing weight in the world market of shale production in the United States, which caused Organization of the Petroleum Exporting Countries decisions to lose strength.

Gold will continue to perform as it did in 2019, as a refuge value in a situation of high volatility that will keep investors cautious, especially with fixed income, due to low interest rates.

In the oil market, which has moved this year between $55 at the start of the year and $66 at the closing, with peaks of up to $71, there will be an effect of the decision on Dec. 6 by OPEC to cut supply by half a million barrels per day.

The year has seen movement in the oil market, with the US increasingly strong in its positions due to high shale production, outside the scope of OPEC, which also does not control the production of this gas in Brazil, Canada and Norway and which therefore loses influence.

What has most impacted the market has been a threat of commercial war and a general slowdown in economic activity, because both factors mean less demand for crude oil.

In addition, the deceleration of a giant such as China, as a consequence in part of trade tensions, has directly affected the price of crude oil, since it is the main consumer of raw materials in the world.

A drone attack on a Saudi Aramco refinery in October shook the markets, with an immediate rebound of the price of 20 percent in the barrel of Brent Crude, a major trading classification of sweet light crude oil that serves as one of the two main benchmark prices for purchases of oil worldwide, to more than $71, because investors considered an installation of that caliber was too vulnerable.

Saudi Arabia responded to the market with a much faster recovery of the plant than calculated and the price moved down in a few sessions.

Analyst Nereida Gonzalez, of Spanish macro-economic research provider Afi, told EFE that by 2020 they expect a slight acceleration of activity, with a price range that will move between $65 and $70.

“There won’t be many surprises,” she added.

Gold, a refuge value par excellence, reached $1,500 per ounce in the summer of 2019, a price not seen since 2013, due to greater uncertainty compared to previous years, XTB analyst Joaquin Robles told EFE.

He added that in 2020 he calculated it will move between $1,450 and $1,550.

Robles said that because raw materials are quoted in dollars, the strong appreciation that this currency has had during the year has also taken its toll, since it has made them “comparatively more expensive.”

Swiss financial services company UBS predicted the precious metal will continue offering better returns due to the continuity of risks, although at a slower pace than in 2019.

The organization said the more uncertainty there is, the more gold will rise, and added that quality assets used as insurance against risks “are not free,” because if geopolitical tensions remit or the economy recovers faster than expected, profitability may go down.

Its future will depend on how different markets behave and how the geopolitical board evolves, according to UBS.

 

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