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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Yergin: Oil Prices Could Break $120 If China Overcomes Covid

  • The vice chairman of S&P Global believes that oil prices could hit $121 if China gets over Covid, although his base case for 2023 is $90.
  • There remains a downside risk in oil markets of a global recession, with S&P Global seeing oil prices falling to around $70 in its most bearish scenario.
  • The three major oil price drivers next year are likely to be China’s demand growth, the risk of a global recession, and Russia’s reaction to the price cap.
Oil prices

Crude oil prices could reach $121 per barrel when China’s economy reopens following a string of Covid-related restrictions, Daniel Yergin, vice chairman of S&P Global, told CNBC.

“If China gets over Covid... then you add a lot of demand to the market,” Yergin explained, also saying that S&P Global’s base case for oil prices remains $90 per barrel of Brent, although there is a downside potential for a slump to $70 per barrel.

The cheaper-oil scenario would play out in case of a global recession, according to the energy expert.

According to S&P Global’s forecast, China’s crude oil demand could rise to 15.7 million barrels daily next year, which would be a 700,000-bpd increase over 2022.

Meanwhile, supply remains tight even though Russian flows are being re-routed to Asia, notably China and India, while underinvestment in new output is keeping a lid on supply growth.

China and a possible recession were recently named as the two drivers for the oil market next year by BlackRock in a market outlook for next year. According to the asset manager, the recession is a certainty with plenty of warning signs such as central banks’ aggressive rate-hiking as they “overtighten” their monetary policy in their efforts to rein in inflation.

Another factor that would affect oil prices next year is Russia’s response to the oil price cap that the G7 and the EU imposed on shipments of Russian crude on December 5.

At the moment, the Kremlin is finalizing its response, but in the meantime, Russian oil is trading below the cap, so exports have not been disrupted in any palpable way.

In the interim, investors are turning to the oil and gas sector for returns, Yergin noted in his talk with CNBC, even though some are applying pressure on oil and gas producers to increase their transition commitments.

By Irina Slav for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on December 21 2022 said:
    The three most bullish forces that will underpin oil prices in 2023 are China’s further easing of lockdown, a robust global oil demand and global underinvestment in oil capacity expansion. These three factors are projected to overwhelm concerns about global recession and Western price caps on both Russian oil and gas exports.

    That is the only viable scenario I see for 2023 and that is why oil prices will be heading towards a higher trajectory with Brent crude oil prices surging above $100 a barrel in the first quarter of 2023 and probably even touching $110.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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