Oil to drift lower as slower growth offsets OPEC+ cuts ANBLE poll
Oil to drift lower as slower growth offsets OPEC+ cuts ANBLE poll
Oil Prices to Stall in 2023 as Weak Economic Growth Curbs Demand
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Oil prices are expected to face a stall in 2023 due to weak economic growth, according to a recent poll conducted by ANBLE. The survey of 37 ANBLEs and analysts reveals a consensus that Brent crude will average $81.95 per barrel in 2023, down from June’s estimated $83.03. Current levels hover around $85, highlighting the potential decline. The forecast for Brent crude in 2024 is slightly higher at an average of $83.67 per barrel.
Despite the recent global average of $80 per barrel, the impact of high interest rates is expected to significantly curb economic growth, particularly in the second half of 2023. Data and analytics firm Kpler maintains a bearish view on the market due to this anticipated impact. Central banks like the U.S. Federal Reserve and the European Central Bank have been raising interest rates to historic highs this month, further dampening economic prospects.
China, the world’s top crude importer, has also experienced sluggish growth, which has affected oil prices throughout 2023. However, analysts suggest that Chinese stimulus measures and a potential pick-up in air travel could provide a boost to prices later in the year. Ajay Parmar, associate director of global oil markets research at HSBC, highlights the possibility of oil demand upside, particularly in the aviation sector, as international flights potentially recover.
The increase in global oil demand for 2023 is anticipated to be around 1-2.1 million barrels per day (bpd), primarily driven by China. Despite concerns over China’s economic outlook, the potential for jet demand recovery later in the year presents an opportunity for oil demand to strengthen. Ajay Parmar notes that while China’s economic performance may disappoint, the upside in oil demand remains possible.
Some analysts are optimistic about supplies tightening and supporting oil prices in the latter part of 2023. The deepening of output cuts by Saudi Arabia and Russia in July, as part of the OPEC+ agreement, could contribute to a deficit in the market during the third and fourth quarters of 2023. John Paisie, president of Stratas Advisors, predicts that these cuts will not be offset by non-OPEC producers, resulting in a deficit in the oil market.
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In conclusion, oil prices are expected to face a stall in 2023 due to weak economic growth and the impact of high interest rates. However, there is potential for a recovery later in the year, driven by factors such as Chinese stimulus measures and a pick-up in international air travel. The increase in global oil demand, led by China, also offers hope for oil prices. Additionally, the deepening output cuts by OPEC+ members could tighten supplies and potentially support oil prices in the latter part of 2023.
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