Oil price: what predictions for the 2023?
2022 has been a complex year for black gold, with Brent and WTI extension on the swing. After the upward peaks of last March and June, with prices even exceeding 120 dollars a barrel, prices have returned well below $100 a barrel.
The slowdown in the world economy, the recent blockages of China – and the Covid chaos that erupted after the easing of restrictions throwing great uncertainty on the recovery – in addition to a stronger dollar have sent crude oil down more than 23% in the last six months.
2022 is closing with Brent around $80 a barrel and WTI at $75-80 a barrel. In summary, crude oil prices are down about a third from their June highs, but remain extremely volatile. Global growth expected to be weak and worries about a recession have so far outweighed fears about insufficient oil supply.
What predictions? Under the lens will be China, war in Russia and sanctions against Moscow, demand and consumption, as well as next steps Opec.
The oil price 2023 under the lens: what estimates for the new year? Some expert assessments.
Oil price 2023: what the experts predict
There are different estimates on Brent and WTI prices for 2023, with one question at the center of investors’ interest: will crude oil rise again to maximum peaks or is it destined to slide, depressed by recession and crisis?
Below are some considerations by important strategists.
Per Ed Morse, global head of Citi, the Brent will travel on $80 and the WTI extension about $75. The basic estimate is for a growth of oil demand about 1.2 to 1.3 million barrels per day next year, with supply set to double in size over the course of 2023, “largely from the Western Hemisphere, from the United States, Brazil, Canada, Guyana, Argentina, perhaps Venezuela and even Mexico.”
The forecast is $90 for Brent in 2023, on the assumption that the OPEC+ alliance will work to keep markets in balance next year. “We expect supply to grow 30% above the pace of demand in 2023 as Russian production fully normalizes and the combination of conventional (Brazil, Norway, Guyana) and unconventional (US, Canada, Argentina) projects ) will provide an additional 1.6 mbd.”
Tom Kloza, Global Head of Energy Analysis and Denton Cinquegrana, Chief Oil Analyst at OPIS expect 2023 to see $90 a barrel for WTI and $95-96 a barrel likely for Brent. “Precisely how much these numbers beat the average will depend on how successful China reopens and Western countries’ ability to avoid a significant recession.”
Bank of America
BofA has predicted that i Brent prices they will average $100 a barrel in 2023 as Chinese oil demand recovers with a post-Covid reopening coupled with a decline in Russian supplies of about 1 million barrels per day (bpd). According to the investment bank, OPEC+ is likely to fully implement a production cut of 2 million barrels per day in a bid to boost oil prices.
“Our oil demand and price projections for the 2023 strongly depend on solid growth in demand for China and Indiaso any delays in reopening Asia could affect our projected price trajectory”the bank said, adding that the path to a post-pandemic environment may not be easy, “given the low levels of immunity in China.”
For 2023, Goldman said it sees Brent oil averaging $98 a barrel and WTI at $92 a barrel, down from previous forecasts of $110 for Brent and $105 a barrel for WTI.
The bank said there was less risk of prices rising this winter with China consuming less than previously expected, Russia exporting near pre-war levels and manufacturing woes easing in Kazakhstan and Nigeria.
World Bank analysts
Peter Nagle and Kaltrina Temaj, by World Bankthey believe that oil prices they will average $92 a barrel in 2023 and $80 a barrel in 2024, down from the $100 a barrel expected in 2022. However, prices will remain well above their recent five-year average of $60 a barrel.
The estimate is highly uncertain, with a variety of factors that could materially alter theglobal supply or demand. As far as procurement is concerned, these include EU sanctions against Russia and the G7 oil price cap, the production capacity of theOPEC+, the outlook for US shale oil and the use and replenishment of strategic oil stocks. For demand, they include a potential global recession and the easing of Covid restrictions in China.
For example, Russian exports are likely to decline in 2023 due to further sanctions. The EU has banned most of its imports of crude oil from Russia (starting December 5, 2022) and will block imports of petroleum products starting February 2023. Redirecting these exports could prove more difficult for Russia, in particularly for pipeline exports which have few alternative transportation options.
In addition to this ban, the UK and the EU have banned the provision of maritime services, in particular insurance, to vessels carrying Russian crude unless they comply with the ceiling on the price of oil of the G7 at 60 dollars a barrel.
How much will this affect the quotes? Will there be less crude oil and more pressure for other supply routes, with prices rising?
Furthermore, the two analysts point out, the OPEC+ production it will remain subject to quotas in 2023. The cartel members have agreed to reduce their production target by 2 million barrels per day starting in November 2022 and continuing through the end of 2023.
And then, the prospects for the crude oil production in the US they may be too optimistic. About half of the growth in world oil production in the 2023 it should come from the United States, where total production is expected to increase by around 1 mb/d. However, there is a risk that growth will disappoint.
Finally, the need to reload strategic reserves at its lowest point, especially in the USA, uncertainty about Chinese demand – the strongest and most impacting on crude oil – and the possibility of a recession could shake the supply/demand balance. Too much oil and low consumption, depressed by an economic slowdown, can lower prices. But strong demand with China in full swing and reserve pressures could push the price of black gold into 2023.
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Oil price: forecasts for 2023
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