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Demand Surge to Keep Oil at $95 in 2023 – Fitch

Oil prices for this year will be in the range of $95 per barrel for Brent crude, citing China’s quicker-than-expected reversal of zero-Covid policies and slow production growth, oil market analysts said.


Prospects for growth have improved on the demand side following the earlier-than-expected easing of Covid-19 containment measures in Mainland China, said the rating agency Fitch Solutions.


“On the supply side, uncertainties around Russia continue to cloud the outlook, but slowing production growth in the US, further delays to the Iranian nuclear deal and continued production restraint by Opec+ will combine to significantly decrease supply growth this year,” Fitch Solutions added.


“It is highly likely that we see $100 at some point this year, however, we don’t expect it to stick,” a Standard Chartered analyst was quoted as saying.


The bank’s analyst forecast Brent to average at $91 this year. So any move above $100 would likely be brief. “It’s just too early to sustain $100 — oil demand growth is limited this year and the macro backdrop is creating headwinds, particularly in first half,” the analyst added.


The first year in which the analyst expects the average price will be over $100 is 2025.


However, Goldman Sachs predicts Brent to hit $105 per barrel in late 2023 on the back of strong demand growth that would push the oil market into deficit in the second half of the year.


Morgan Stanley also sees a tighter oil market in the second half of the year, which could push Brent crude to $110 per barrel by the end of the year.


While China’s rebound is already underway and expectations of stronger oil imports have a sound foundation in Beijing’s recently issued import quotas, the situation with Russian oil production is less clear.


Opec recently left its forecast for global oil-demand growth unchanged, but noted that the outlook remains surrounded by uncertainties including global economic developments, shifts in Covid-19 containment policies, and geopolitical tensions.”


Opec said it left its estimate of 2022 demand growth unchanged at 2.5 million barrels a day. The outlook for 2023 was also unchanged at growth of 2.2 million barrels a day. Minor upward adjustments to the 2023 forecast were made due to the expected better performance in China’s economy on the back of its reopening from Covid-19 restrictions, while other regions are expected to see slight declines, due to economic challenges that are likely to weigh on oil demand.


Oil demand is expected to rise by 1.7 million barrels a day year-over-year in the first quarter. Total world oil demand is anticipated to reach 101.8 million barrels per day in 2023, Opec said. The outlook for supply growth in 2023 was also unchanged at 1.5 million barrels a day.


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