In 2018, the oil market was somewhat unpredictable. When oil prices rocketed to $86 per barrel of Brent crude in October, some analysts predicted that $100 oil was on the horizon. Instead, the price crashed to $53 per barrel at the end of the year, marking the industry's first annual price decrease since 2015.
The price of Brent crude dropped by almost 20%, from $67 per barrel to $53 per barrel. Fear of a supply shortage due to US sanctions against Iran propelled prices to a four-year peak of $86 per barrel, and subsequent fear of oversupply, with a sudden increase in US shale production, pushed prices lower.
The trade war between the US and China, as well as a tight US Federal Reserve monetary policy, are expected to soften global energy demand. Although OPEC and its allies (primarily Russia) decided in early December to cut output by 1.2mn barrels per day (bpd), with 800,000 bpd cut coming from OPEC members and the remainder from allies, oil prices have continued to drop.
Although OPEC will cut production, and Algerian Energy Minister Mustapha Guitouni said that "if the situation requires a further reduction, we will do it", the US is expected to drill a record 12.1mn bpd in 2019, according to the International Energy Agency.
The extent to which US production will dent OPEC's plans will be assessed by the group in the first quarter of 2019. Russian Energy Minister Alexander Novak has called for a more moderate approach, saying that OPEC and its allies should continue to monitor the market instead of reacting to oil price fluctuations.