It seems that the oil markets are facing an important question, as the recent declines in oil prices suggest that the jumps that we witnessed in 2022 are a thing of the past, but what if this picture hides behind it the fact that we may be on the verge of a storm in every sense of the word in the oil markets ?
One of the factors that may ignite this storm is the growth of Chinese demand that exceeds expectations. Goldman Sachs raised its expectations for demand growth in China, indicating that this demand may grow by more than one million barrels per day by the end of the year.
Goldman Sachs also expected oil prices to rise once more above $100 a barrel this year, and in 2024 the world may face a serious supply crisis as excess production capacity is exhausted.
For his part, Director of the International Energy Agency Fatih Birol expected that the “OPEC +” alliance would reconsider oil production in the coming months in the event of a significant increase in Chinese demand for oil.
But what if the “OPEC +” alliance is unable to bridge this gap?
The International Energy Agency estimates that the world will need regarding 31.4 million barrels per day of oil from OPEC members in the last quarter of the year.
But the problem here is that this number is regarding one million barrels per day higher than the levels these countries were producing in April 2020 when there was no agreement to cut production!
Russian oil production will add fuel to the fire. Expectations indicate that this production will decline by regarding 400,000 to 1.5 million barrels per day during this year.
Here the equation will be as follows; Significant growth in demand is offset by weakness in supply, which is what Goldman Sachs warned regarding, who said that the world faces the danger of running out of excess production capacity by 2024, meaning that there will be no spare capacity to meet any additional growth in demand.
In the end, if the expectations are correct, the oil markets will be facing a crisis that is no less severe than what it witnessed in the past, and perhaps even greater.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said during this week’s episode of “Energy World” on Sky News Arabia that the markets have so far been the main fuel for the increase in oil prices, especially due to the increase in demand from China. Pushing prices back to the range of $80 a barrel over the past two weeks.
Hansen believes that oil prices will remain below the level of $90 a barrel during the first half of this year, to exceed it during the second half.
Regarding the “Goldman Sachs” report, Hansen believes that the markets will face great challenges with regard to oil, especially with the decline in investments in the energy sector, which means that the markets will move at very narrow levels, in light of other factors represented in the speed of the transition to green energy and the level of economic activity around the world.
Hansen was not optimistic regarding oil prices, as he said that the current price levels will remain familiar in the coming periods and may continue for years.
Saxo Bank: Oil prices will exceed $90 in the second half of 2023
Regarding the performance of precious metals during the current year, the head of commodity strategy at Saxo Bank said that the bank maintains a positive view of gold price movements in 2023, specifically when markets begin to question the ability of central banks to return inflation to target levels.
For example, according to Hansen, inflation in the United States was expected to decline to levels below 2.5 percent in the long term, “but now it may end at levels around 3 to 4 percent,” as he put it.
And gold, according to Hansen, will be the most fortunate precious metal during 2023, as stock markets may face difficulties in achieving gains with the persistence of inflation, and the gradual decline of the dollar will support the prices of the yellow metal.
Copper came in second place among the precious metals, which Hansen expected to rise more than the metal’s rise in 2022.
Saxo Bank: Gold may rise to new highs in 2023
