Oil, gas and iron ore prices: what’s the current outlook for 2020?
With 2020 fast approaching, we examine where Westpac economists believe three of the world's most important commodities are poised to head next.
As 2019 draws to a close – analysts, economists and armchair investors have all taken to predicting where some of the world’s key commodities may head in 2020.
With that in mind, we examine where Westpac economists currently believe iron ore, crude oil and gas prices will head in the 2020 calendar year – as well as some of the key ASX stocks that are likely to be impacted by these price fluctuations.
Iron ore 2020 price forecast: bears emerge
Centrally, although Westpac economists note that it’s too early to be overly pessimistic about the iron ore outlook, the bank nonetheless posits that prices are expected to:
‘Hold around current levels to mid-2020,’ before falling on slower demand and an uptick in supply.
Ultimately, Westpac economists expect iron ore prices to end out CY20 at US$65 per tonne. At iron ore’s current price of US$92.34 per tonne – this would imply potential downside of approximately 29%.
This relatively bearish view seems to be becoming the norm amongst analysts and economists. As we wrote on Wednesday, the National Australia Bank ‘predicts iron ore will hit US$79 per tonne in Q1, US$76 in Q2, US$72 in Q3 and $68 in Q4.’
Ultimately, given their concentrated iron ore operations, the ASX stocks most likely to be impacted by lower iron ore prices are Fortescue Metals Group (ASX: FMG), Rio Tinto (ASX: RIO) and BHP (ASX: BHP).
Gas and oil prices: 2020 expectations
The price of crude oil will likely to be a key focus for investors in the coming calendar year – with the now US$2.0 trillion Saudi Aramco – completing their initial public offering just this week.
'We believe softer global demand and ongoing robust US supply will see crude drift down to US$55/bbl by end 2020,’ says Westpac.
This, elaborates Westpac economists, can centrally be viewed as a supply-side issue, further pointing out that:
‘Despite the new OPEC+ agreement in early December, global crude supply is still forecast to show strong growth in 2020 as the continued OPEC+ production constraint is not enough to fully offset the growth in non-OPEC production.’
In line with these modest forecasted declines in the price of oil, the bank also believes that gas prices are likely to come under pressure by the end of 2020. Examining gas prices, Westpac noted that:
'From a high of US$10/mmbtu in April prices are currently US$9/mmbtu and our forecast is for US$8/mmbtu at end 2020.'
With operations spanning oil and/or gas: Santos (ASX: STO), Woodside Petroleum (ASX: WPL) and Beach Energy (ASX: BPT) look to be some of the most exposed ASX equities to the fluctuations of gas and oil prices.
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