What will happen to oil prices in 2023?

What will happen to oil prices in 2023?
What will happen to oil prices in 2023?

A number of analysts expect oil prices to continue to rise early next year, even after a brief decline in prices until the end of 2022.

Oil prices traded below $100 a barrel for much of August, weighed down by fears of demand destruction and worries about a looming recession in Europe and the United States. The prospect of a slowdown in the economic growth of the largest importer of crude oil in the world – China – also had an impact, writes Tsvetana Paraskova in a comment for Oilprice.

But absent a deep recession that would sink global oil demand, crude prices will rise toward the end of the year and into early next year, some analysts say. Most of them see severely limited spare capacity at both US shale producers and the OPEC+ group as a key factor that will boost oil prices next year, even if global demand grows by less than expected.

A pending EU embargo on Russian oil imports by sea later this year is also expected to push prices higher as trade flows will have to readjust, as happened in the first two months of Russia’s invasion of Ukraine.

Bearish market experts see the eventual negotiation of the Iran nuclear deal, which could put about 1 million barrels per day of oil back on the market within a year, as a factor that would depress prices.

However, last week the world’s largest crude exporter and largest producer within the Organization of the Petroleum Exporting Countries (OPEC), Saudi Arabia, announced its readiness to raise oil prices, saying its OPEC group partners + have “the means to deal with market challenges, including production cuts at all times and in various forms”.

Some analysts expect the end of the release of the US strategic oil reserves, which is scheduled for October. This will further tighten the market ahead of winter as utilities in Europe and Asia switch from gas to oil due to extremely high prices for the blue fuel.

Slowing economic growth and a possible nuclear deal with Iran are dragging prices down. But the switch from gas to oil, OPEC+’s willingness to cut production again, low levels of global spare capacity and the end of the release of US strategic oil reserves are favoring oil price growth.

A mild recession may not wipe out oil demand growth, analysts say.

Because of very low spare capacity, “even if demand just turns positive, even by a small margin, I think then we should be in for much, much higher prices,” commented Neil Dingman of Truist Securities.

Referring to global spare capacity, the energy expert says that “everywhere in OPEC+, even with Saudi Arabia, there is no spare capacity.

Dingman believes oil could fall to $80 a barrel this year, but then jump to $110 a barrel early next year, largely due to limited spare global production capacity.

Saudi Arabia said this week that OPEC+ is ready to cut production if necessary.

According to Energy Minister Prince Abdulaziz bin Salman, markets cannot reflect the real production situation and provide a false sense of security at times when spare capacity is severely limited.

According to him, the OPEC+ group will soon start working on a new agreement after 2022 and that “we are determined to make the new agreement more effective than before.”

With this, Saudi Arabia sends a clear signal to the market that it will continue to manage oil supplies, respectively the price.

If the recession doesn’t hit global oil demand hard, oil prices could rise again as OPEC+ could counter the return of Iranian oil with new cuts.

The article is in bulgaria

Tags: happen oil prices

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