“Shocks” expected for black gold. What will oil prices be like in 2023?

Over the course of 2022, the price of oil has gained great attention internationally, above all due to the impact of the Russian war against Ukraine and the sanctions imposed on Moscow in the energy sector, not to mention the “OPEC Plus” decisions to reduce production to ensure stability.

Oil prices saw a record increase this year when they hit a level above $139 a barrel in March, becoming their highest level since 2008 after Russia’s invasion of Ukraine raised concerns over the offering. Prices fell rapidly in the second half of 2022 on fears of a global recession, according to a Reuters report.

Economists suggested in a survey released by Reuters on Friday that the average price of Brent crude oil will be around $89 a barrel in the year 2023, noting that the slight gains the energy market will make are due to the ” gloomy global economic backdrop and the outbreak of Covid-19 in China, threatening demand growth “have offset the impact of sanctions-induced supply shortages on Russia.”

Oil prices in 2023

Economic analyst Alaa Al-Fahd said that despite the slight decline in “oil prices by the end of 2022, their levels will remain above current price rates”.

In response to Al-Hurra’s questions, he predicted that crude oil prices will break above the $100 level, especially if Russia’s war in Ukraine continues, which could have the biggest impact on prices, among other economic factors.

The Reuters poll, involving 30 economists and analysts, expects the average price of Brent crude to be 4.6% lower than the average in a survey conducted in November, when they forecast a $93.65 a barrel level.

The average price of U.S. crude is expected to reach $84.84 a barrel in 2023, up from $87.80 a barrel the previous month.

CFI Group financial analyst Muhannad Erekat said, “Technical analysis of oil prices indicates its levels will remain at an average of $90 a barrel.”

He explained in an interview with the “Al-Hurra” website: “Since last March, crude oil prices have declined by about 30%, after which a resistance level has formed at $90, while the level of Prices at $77 formed important support levels.”

He believes that there are several factors that we need to follow during the first quarter of 2023, “the first of which is the reduction of Russia’s production between 5 and 7 percent, due to the capping of the price of Russian oil, and the ban on imports of crude oil by sea and, secondly, the hope of a recovery in demand from China, and thirdly, there are fears of slowdown and uncertainty of the global economy.

Shocks are expected

An economic researcher specializing in energy affairs, Amer Al-Shobaki, said that “expectations for the oil market for the year 2022 were focused on the recovery from the Corona pandemic and the return of improved demand, but the Russian war against the ‘Ukraine confused the energy market and the price increase, which was followed by other effects of inflation and the attempt of central banks to cope with this increase in interest rates.

He added, in a telephone conversation with the “Al-Hurra” website, that “the factors influencing the price increase continue and opportunities for shocks still exist”, noting that the average price of oil in 2022 was $97 per barrel, while the average price during 2021 was around $71 per barrel.

Al-Shobaki added that various international forecasts indicate that price levels could vary from 89 to 100 dollars a barrel during 2023, but the energy market could be subject to shocks, especially with the continuation of the war in Russia. the state of uncertainty that controls the global economy market, the persistence of inflationary pressures and the continuity of economic measures Central banks raise interest rates.

“We expect the world to slip into a recession in early 2023 as the effects of high inflation and interest rate hikes become apparent,” Capital Economics economist Bradley Saunders told Reuters.

OANDA lead analyst Edward Moya said in his interview with the agency that “the oil market still suffers from tight supply despite a dim global demand outlook with growing fears of a recession,” adding that China will be the main focus in the first quarter of next year.

For the full year, Brent is aiming for an 8% increase, after jumping 50% in 2021. U.S. crude is aiming for a 4.6% increase in 2022, after rising 55% for the year previous one. Both benchmarks declined in 2020 due to the negative demand impact of the pandemic.

Oil demand in 2023

Al-Fahd expects oil demand to pick up momentum during the first quarter of 2023, especially with the winter season, when many countries will have to offset their demand for Russian gas, to use oil as its substitute to provide heating for citizens , especially in European countries.

“In the event of a sharp decline in Russian exports, which we do not expect to happen, OPEC Plus is likely to be ready to increase production to prevent prices from skyrocketing,” Kpler said for data and analysis. .

In early December, the US Energy Information Administration lowered its forecast for 2023 global oil demand growth from 160,000 bpd to one million bpd.

The economist Al-Shobaki explains that the demand for oil will grow during 2023, despite fears of an economic recession that could hit the economies of Western countries.

Analysts told Reuters that oil demand will increase significantly in the second half of 2023, boosted by the easing of COVID-19 restrictions in China and central banks taking a less aggressive approach to interest rates.

Financial analyst Erekat indicated that expectations point to growth in “demand”, which will be associated with “OPEC Plus” maintaining the production cut policy at least during the first quarter of 2023.

He added: “OPEC Plus has confirmed in its recent statements that its policy towards production will be hostage to supply and demand factors, and not according to political data, and therefore it will be difficult to predict what its course will be next period. “

Oil prices fell in the second half of this year as central banks around the world raised interest rates to fight inflation and the dollar soared. This has made dollar-denominated commodities a more expensive investment for holders of other currencies, and China’s coronavirus restrictions, which were only eased in December, dashed hopes of a recovery in oil demand for the world’s second-largest consumer. of crude.

In its latest report, the International Energy Agency maintained its expectations of a moderate increase in oil demand this year and next, against the backdrop of “the possibility that the global economy is heading towards recession”.

The agency slightly raised its forecast for an increase in diesel consumption in the fourth quarter of this year, and therefore global oil demand is expected to increase by 2.3 million barrels per day in 2022.

In 2023, the increase is expected to reach 1.7 million bpd, bringing the total to 101 million bpd, according to International Energy Agency estimates, noting “economic headwinds and a global economy runs the risk of heading towards recession and an energy crisis in Europe”.

On the supply side, volumes fell by 190,000 barrels per day in November after the “OPEC Plus” decision to cut production quotas to support crude oil prices in October, and the agency expects a ” sharper drop” of global supply, in December, with the entry into force of the European embargo and the maximum price set by the G7 for Russian oil.