During the year 2022, oil prices gained great attention at the international level, especially due to the impact of the Russian war on Ukraine, and the sanctions imposed on Moscow in the energy sector, not to mention the “OPEC Plus” decisions to reduce production in order to ensure stability.
Oil prices this year recorded a record increase when, in March, they reached a level exceeding $139 a barrel, becoming the highest level since 2008 after the Russian invasion of Ukraine raised supply concerns. Prices fell rapidly in the second half of 2022 due to fears of a global recession, according to a Archyde.com report.
Economists suggested, in a poll published by Archyde.com, on Friday, that the average price of Brent crude will be around $89 a barrel during the year 2023, noting that the slight gains that the energy market will achieve are due to the “gloomy global economic background and the outbreak of Covid-19 in China, which threatens demand growth.” They offset the impact of the 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 higher than the current price rates.”
In response to Al-Hurra’s inquiries, he predicted that crude prices would exceed the $100 level, especially if the Russian war in Ukraine continues, which may have the most impact on prices, in addition to other economic factors.
The Archyde.com poll, which included 30 economists and analysts, expects the average Brent crude price to be 4.6 percent lower than the average of a poll conducted in November, when they predicted a level of $93.65 a barrel.
It is expected that the average US crude price will reach $84.84 per barrel in 2023, compared to $87.80 per barrel in the previous month.
Financial analyst at the CFI Group, Muhannad Erekat, said, “Technical analysis of oil prices indicates that its levels will remain at an average of $90 a barrel.”
He explained in an interview with “Al-Hurra” website, “Since last March, crude oil prices have witnessed a decline of about 30 percent, after which a resistance level formed at $90, while the $77 price level formed important support levels.”
He believes that there are several factors that we must follow up during the first quarter of 2023, “the first of which is Russia’s reduction of production by between 5 to 7 percent, due to setting a ceiling on the Russian oil price, and the ban on imports of crude by sea, and secondly, the hope of a recovery in demand from China, And third, there are fears of a slowdown and uncertainty in 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 recovery from the Corona pandemic and the return of improved demand, but the Russian war on Ukraine confused the energy market and raised prices, which was followed by other effects of inflation and the attempt of central banks to confront This increases interest rates.”
He added, in a telephone conversation with the “Al-Hurra” website, that “the factors affecting the rise in prices are still continuing, and the opportunities for shocks still exist,” noting that the average oil price during 2022 amounted to 97 dollars per barrel, while the average price during 2021 was about 71 dollars. per barrel.
Al-Shobaki added that various international forecasts indicate that price levels may range from $89 to $100 per barrel during 2023, but the energy market may be subject to shocks, especially with the continuation of the Russian war, the state of uncertainty that controls the global economy, the continuation of inflationary pressures, and the continuity of economic measures. Central banks increase interest rates.
“We expect the world to slip into recession in early 2023 as the effects of high inflation and interest rate increases become apparent,” Bradley Saunders, an economist at Capital Economics, told Archyde.com.
OANDA chief analyst, Edward Moya, said in his interview with the agency that “the oil market is still suffering from tight supply, despite the weak global demand outlook with growing recession fears,” adding that China will be the primary focus in the first quarter of next year.
For the whole year, Brent is heading for an eight percent increase, after jumping 50 percent in 2021. US crude is heading for a 4.6 percent increase in 2022, after rising 55 percent in the previous year. Both benchmarks declined in 2020 due to the negative impact on demand from the pandemic.
Oil demand in 2023
Al-Fahd expects that the demand for oil will witness momentum during the first quarter of 2023, especially with the winter season, when many countries will need to compensate for their demand for Russian gas, to use oil as a substitute for it in order 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, it is likely that OPEC Plus will be ready to increase production to prevent prices from skyrocketing,” said the company, “Kpler” for data and analytics.
In early December, the US Energy Information Administration lowered its forecast for global oil demand growth in 2023 by 160,000 barrels per day to one million barrels per day.
The economist, Al-Shobaki, explains that the demand for oil will grow during 2023, despite fears of an economic recession that may affect the economies of Western countries.
Analysts told Archyde.com that oil demand will rise significantly in the second half of 2023, driven by the easing of COVID-19 restrictions in China and central banks adopting a less hawkish approach to interest rates.
The financial analyst, Erekat, indicated that expectations indicate the growth of “demand”, which will be associated with “OPEC Plus” maintaining the policy of reducing production during the first quarter of 2023 at least.
He added, “OPEC Plus 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 how its course will be for the coming 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 rose. That has made dollar-denominated commodities a more expensive investment for holders of other currencies, and China’s coronavirus restrictions, which were eased only in December, have dashed hopes of a recovery in oil demand for the world’s second-largest crude consumer.
In its latest report, the International Energy Agency maintained its expectations of a moderate rise 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 barrels per day, bringing the total to 101 million barrels per day, according to estimates by the International Energy Agency, noting “economic headwinds and a global economy that is likely to head towards recession and the energy crisis in Europe.”
On the supply side, volume decreased by 190,000 barrels per day, in November, after the “OPEC Plus” decision to cut production quotas to support crude prices, in October, and the agency expects a “more sharp decline” in global supply, in December, with the entry into force of the European embargo. and the price ceiling set by the Group of Seven on Russian oil.