2023 oil preview

“Looking forwards to 2023, we see more reasons to be bullish oil prices than bearish, with global oil supply constraints set to keep balances tight despite a pronounced global economic downturn,” said Bill Farren-Price, director of EIR. However, Farren-Price noted that high prices amid a spluttering global economy engender longer-term risks for oil, since counter-cyclical high prices could deepen and prolong an economic recession.

Key takeaways from the report:

• Oil supply tightness means EIR is bullish on prices heading into 2023, despite considerable economic headwinds that accompany a disjointed COVID-19 recovery, geopolitical crises and a historic tightening phase for G7 monetary policy. As of December, EIR forecasts Brent at US$93/bbl in 1Q23, rising to US$108 in 4Q23 (Appendix 1).
• Sanctions on Russian oil exports will create a net loss to the market at a time when OPEC+ has pivoted toward supply management again. OPEC production capacity remains at historically low levels, giving limited scope to offset any unexpected loss of supply elsewhere. These three factors alone should ensure that oil prices gravitate toward the higher end of the post-COVID-19 range in 2023.
• As US oil supply growth establishes a lower trend around 0.5 million bbl/d per year and the NOCAR (non-OPEC, Canada, America, and Russia) supply wedge stays flat until mid-decade, it is hard to see how supply will meet some agencies’ more bullish estimates for demand growth in 2023 and the years beyond without oil prices higher than the current strip. Geopolitical risk in the Arabian Gulf and Central Asia compounds EIR’s view that supply risks remain to the downside.

Read the article online at: https://www.worldpipelines.com/special-reports/11012023/2023-oil-preview/