Brent futures caught in a range as recession fears trump demand improvements
Front-month ICE Brent has increased by $0.54/bbl on the day, to $79.79/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
A World Bank blog cites a number of supply pressures for Brent next year, including a decline in Russian oil production from additional European sanctions begin on 5 February, low spare crude supply capacity among OPEC+ members, and a supply crunch in the US due to poor shale production and heavily depleted Strategic Petroleum Reserves (SPRs).
President Joe Biden's senior energy adviser Amos Hochstein has called on US shale producers to increase their production, saying that the administration has given them "all the tools" they need, according to the Financial Times.
Morgan Stanley forecasts Brent to rebound to $110/bbl by mid-2023. “We remain constructive on oil prices driven by recovering demand amid constrained supply due to low levels of investment, risks to Russia supply, the end of SPR releases, and a slowdown of US shale,” the investment bank said.
Brent prices are expected to be driven by Chinese growth next year. China's decision to abandon its zero-Covid policy and focus on economic stability has boosted optimism that oil demand will soon recover when consumption and travel pick up.
Downward pressure:
On the other hand, the World Bank sees sluggish global economic growth and a potential global recession as key risks to global oil demand next year.
Citi's global commodities head Ed Morse has predicted Brent will average a significantly lower $76/bbl next year, as supply outstrips global demand.
“We have an underlying view that we will see an imbalance between supply and demand across 2023, with significantly more supply coming into the market than demand, leading to inventory builds, which should weigh on prices so that we see prices ending the year on average lower than the beginning,” Morse has told Insider.
By Konica Bhatt
Please get in touch with comments or additional info to news@engine.online
