Oil prices are likely to show small increases in 2023 as the pessimism of the global economic backdrop and rising COVID-19 flare-ups in China offset the threat of demand growth by supply shortages caused by sanctions on Russia.
A survey of economists and analysts estimates Brent crude to average $89.37 per barrel in 2023; that’s about 4.6% lower than the consensus of $93.65 in a November survey. The global benchmark was an average of $99 per barrel in 2022.
West Texas Intermediate (WTI) crude oil is estimated to average $84.84 per barrel in 2023.
The world is expected to enter a recession in early 2023 as the effects of high inflation and rising interest rates are being felt.
Brent has fallen more than 15% since early November and was trading around $84 a barrel on Friday as rising COVID-19 cases in China weighed on the outlook for growth in oil demand at the world’s largest importer of crude oil.
While fears of a recession are widely discussed, the oil market is still tight despite the weakening global demand outlook and China will be the main focus in the first quarter of next year.
Most analysts say oil demand will increase significantly in the second half of 2023 as COVID-19 restrictions in China are relaxed and central banks embrace the idea that they will cut interest rates.
The impact of Western sanctions on Russian oil is expected to be minimal, according to the survey. Much impact is not expected from the price cap, which is designed to give bargaining power to third-country buyers.
Moscow this week signed a decree banning the supply of oil and petroleum products to countries participating in the G7 Group price cap for five months from 1 February.
In the event that Russia’s exports drop drastically, which is not expected, OPEC+ will likely be ready to increase production to prevent prices from rising too high.
