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Oil prices will only gain slightly in 2023 thanks to a worsening global economic outlook as well as the latest COVID-19 outbreak in China, which will take a hit on oil demand.
A survey of 30 economists and analysts have predicted for Reuters that Brent crude will average $89.37 a barrel in 2023, just 4% higher than current price of $85.91 per barrel and ~4.6% lower than the $93.65 consensus in a November survey.
Brent averaged $99 per barrel in 2022. Meanwhile, the experts have predicted that U.S. crude will average $84.84 per barrel in 2023, lower than the previous month's $87.80 consensus.
"We expect the world to slip into recession in early 2023 as the effects of high inflation and rising interest rates are felt," Bradley Saunders, assistant economist at Capital Economics, has told Reuters.
Another oil bear, Credit Suisse, says the selloff is not yet over.
“The market remains well below its 55-Day Moving Average and 200DMA at 89.01 and 100.67, and with medium-term momentum declining and global growth concerns looming, we think further weakness is likely to follow. Brent is likely in due course to see further downside towards the 61.8% retracement at 63.02, where we would have higher confidence of a more stable floor and for a consolidation phase to emerge.”
The Reuters poll contradicts a string of bullish analysis on oil in the past couple of weeks, including a $90/barrel prediction from Bank of America and a $100/barrel prediction from Ninepoint Partners LP.
Oil markets have gone back and forth with recession fears. While inflationary pressures seem to have eased, leading to optimism for lower rate hikes by the Fed in the future, concerns linger that rates could remain high for the first half of this year.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.