Oil prices could behave in 2019 much like they did in 2018, presenting a potential challenge for Oklahoma's state budget.
"First, you will see upward movement in the major part of the year, but in the later part of the year, there will be some declines. The difference is that the movement will occur in a relatively narrow range," said Oil & Gas Journal Senior Economics Editor Conglin Xu.
Last year, West Texas Intermediate crude started the year around $61 a barrel, climbing to a peak of $76 in early October. Prices then fell to a 2018 and 18-month low of less than $43 in late December.
Unlike a 2014 crash, the slump was accompanied by a drop in other equity markets.
"So, this could be a signal that the recent slump was caused by a combination of oversupply and a worsening macroeconomic outlook," Xu said.
The S&P 500 fell around 600 points roughly at the same time oil prices dipped last year.
The state budget assumes oil prices in the mid-$50 range.
Xu said while WTI should fetch $50 to $55 a barrel for the most part, oil companies won’t be producing as much of it.
"Due to the pipeline bottlenecks, U.S. oil production is expected to slow down to 1.2 million barrels per day from 2.1 million barrels per day last year," Xu said.
While pipeline capacity should catch up with production as soon as the end of 2019, Xu said a sudden surge in production from drilled but uncompleted wells could cause new problems.
