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An Outlook For Oil Prices In H2 2023


When this year began, it was starting to look like the glory days for energy investors were over. Throughout most of the previous two years the sector had rapidly made up for lost time, being by far the best-performing S&P 500 sector in that timespan after a decade or so of underperforming as oil soared to well over $100. But as 2023 dawned, crude had been heading lower for a few months and energy stocks were beginning to reflect that. Still, anyone who has ever traded or invested knows that these things are usually cyclical and that, at some point, energy stocks and oil will reassert themselves. So, as the first half of the year ends, it is a logical time to take stock and assess the chances of that recovery coming in the second half of the year.

The success of energy investments in 2021 and the first part of 2022 was due to crude jumping to multi-year highs, hitting $130 a barrel in early 2022 after demand recovered quickly from the hit taken during the pandemic, just as supply reductions that resulted from WTI being below $30 a barrel for most of 2020 began to take effect. By the time this year rolled around, though, the outlook and mood were very different. The focus switched from tight supply to concerns about demand. Traders and investors were expecting interest rate hikes in the US and around the world to force a global recession and oil was beginning to reflect that expectation.

As you can see from the chart below for CL, the main WTI futures contract,…

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