As oil prices soar on China’s reopening, analysts are looking at all the factors that could slow or speed up crude oil. What can still happen?
The oil price climbs for the sixth day on hopes that US inflation is cooling down and in the midst of a wave of crude oil buying by China.
So is this the direction of the black gold plotted in this early 2023? Between forecasts and assessments, analysts are not yet all aligned on the estimates for oil prices. Too many factors to consider in order to obtain plausible projections: from the evolution of the war, to the consistency of the Chinese reopening to the role of sanctions on Russian crude oil and politics OPEC, the elements at play are diverse and uncertain.
As the oil price rises again, what do analysts expect for the coming months? Here’s some new estimates.
Oil price picks up momentum: can it last?
West Texas Intermediate surged above $78 a barrel and was heading for the longest streak of daily gains since February. Brent is traveling above $83 a barrel.
China’s buying of crude after Beijing issued an exceptional amount of import quotas this week is adding to bullish demand sentiment. In recent days, the country has stepped up supplies from the US and West Africa.
“The mood is optimistic”, said Tamas Varga, an analyst at PVM Oil Associates. “But remember: it can get worse as quickly as it gets better if inflationary pressure proves entrenched.”
The recent upward push in oil has taken hold after a difficult start to the year amid fears of a slowdown in the global economy. However, many analysts remain bullish on the long-term outlook.
Goldman Sachs said it expects crude oil to hit $110 by the third quarter as China’s economy reopens, while Morgan Stanley sees a more tense second half of the year. What to expect?
The supply/demand factors on oil: what will 2023 be like?
As just mentioned, Morgan Stanley expects a contraction of the oil market in the third and fourth quarters of 2023, supported, among other factors, by a recovery in demand induced by the reopening of China’s borders .
“We see the oil market balancing out in Q2 and tightening in Q3 and 4, supporting higher prices later this year”, he said, with uncertainties such as China reopening, recovery risk to Russian supply, US shale slowdown and ending SPR releases “turning tailwind.”
Although Morgan Stanley has forecast that Brent prices in the first quarter will remain within a range of about $80-85 a barrel, it estimates them to reach $110 a barrel by the end of the year.
“We see the rise in demand for oil in China due to the reopening at almost 1 million barrels per day, to be realized progressively throughout the year”, the bank said, adding that it expects the reopening the country will also accelerate the demand for aviation.
Meanwhile, Barclays warned that a deterioration in global manufacturing activity could pose a downside risk to its current $98 a barrel Brent price forecast for 2023.
“Given the challenging macroeconomic environment we highlight a $15-25 a barrel decline in our forecasts if the slump in global manufacturing activity worsens similarly to 2008-2009 and this would imply a $1-2 million decline barrels per day for our demand estimates”, the bank said in a note.
In summary, oil demand cyclical trends are pointing to the downside, but supply-side structural trends - slowing US production growth, proactive OPEC+ and the effect of sanctions on Russian supplies - have kept prices sustained significantly above pre-Covid levels, according to the bank.
Original article published on Money.it Italy 2023-01-12 12:56:04. Original title: Il petrolio ha iniziato la corsa al rialzo?
