2019 was characterized by relatively low oil prices on the global markets. The volume-weighted average price of Brent crude on the ICE stock exchange stood at USD 64.06 per bbl in 2019 and it was USD 7.8 per bbl lower as compared to 2018, which meant a drop in the price of Brent crude oil by 10.9% year on year. Brent crude oil was cheapest in the fourth quarter of 2019, when its volume-weighted average price was only USD 62.01 per bbl. The maximum price (USD 68.22 per bbl) was reached in the second quarter of 2019.
The total trading volume was more than 62,800 thousand barrels in 2019, while it reached more than 66,100 thousand barrels in 2018, which meant a 5% decline.
The global events were the main factors that had an impact on the demand and supply on the oil markets.
The trade negotiations between the USA and China, conducted in 2019, intensified at the end of the fourth quarter of 2019. At the beginning of August 2019, the USA imposed additional tariffs on China and, in response, China imposed its tariffs on selected US goods. Fears of a global recession caused by the economic weakness in China and the exacerbation of the trade conflicts around the world caused the price of oil to fall to just over USD 52 per bbl at the beginning of 2019.
The oil production in the USA reached a record-breaking level of 12,900 thousand barrels a day in the fourth quarter of 2019. In December 2019, as a result of the OPEC meeting, the cut in oil production was increased from 1,200 thousand to 1,700 thousand barrels per day, which should take effect in the first half of 2020. At the same time, Saudi Arabia decided to make further cuts by 400 thousand barrels per day, thanks to which the effective reduction increased to 2,100 thousand barrels a day in total.
Another significant event affecting oil prices was the attack on the oil refineries in Saudi Arabia, as a result of which the oil price rose to almost USD 72 per bbl in September 2019. However, after the full production had been restored, the price again fell below USD 65 per bbl after a dozen or so days.
ARA coal prices dropped from USD 86.60 per ton to USD 71.5 per ton in Q1 2019. The price drops were mainly caused by China’s activities involving an increase in the domestic production combined with the launch of the new nuclear power plant capacity, as well as the trade conflict between the USA and China, which had an impact on the valuation of energy commodities.
An increase in coal production in China, a decrease in demand for coal in Germany, France, Spain, and the United Kingdom, caused by a decrease in hard coal based electricity production to 4.7 TWh (14.4 TWh in April 2018), led to a surge in the coal inventory at the ARA ports to record-breaking levels. This accelerated the fall in the ARA coal prices, which stood at approx. USD 62 per ton in May 2019, while the prices of the coal imported from Russia reached their lowest level since the beginning of 2019, falling to USD 48.08 per ton.
In Europe, as a result of June weather forecasts for the summer period, there was an increase in the prices of the ARA contracts, based on the fear of the risk of a low water level that could, like in 2018, prevent the transportation of coal to the power plant by rivers. The above increase was negated by the market participants and, as a consequence, as early as in August 2019, the price of coal approached USD 62 per ton again.
In September 2019, an increase in the ARA coal valuation was recorded, which was caused by the market participants preparing for the winter season; however, as time passed and new weather forecasts appeared, the prices were more volatile. Gas prices, which, in combination with the climate and energy policy, led to a reduced interest in coal in the industry and energy sectors, brought about a drop in coal prices below USD 60 per ton (the 2019 minimum price reached USD 56.15 per ton), i.e. levels not seen on the market since 2016.