Market: The economic slowdown should weigh on oil prices in 2023
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by Brijesh Patel

(Reuters) – Oil prices are expected to rise modestly in 2023 as the worsening global economic backdrop and the resurgence of the COVID-19 outbreak in China hurt demand for crude while counteracting the effect of lower oil prices. offer, following Western sanctions against Russia, shows a Reuters investigation published on December 30.

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According to this survey of 30 economists and analysts, the barrel of Brent should settle at 89.37 dollars on average this year, against a consensus of 93.65 dollars for the survey carried out in November. Brent, which serves as a global benchmark, averaged $99 per barrel in 2022.

The barrel of US light crude is expected to average $84.84 in 2023, compared to a consensus of $87.80 previously.

“We expect the world to enter a recession in early 2023, when the effects of high inflation and rising interest rates will be felt,” said Bradley Saunders, deputy economist at Capital Economics.

Since the start of November, Brent crude has fallen more than 15% and closed around $86 on Friday as a spike in COVID-19 cases in China dampened the country’s oil demand growth outlook, first global importer of crude.

“The market is still tight despite the weakening outlook for global demand amid heightened fears of recession,” said Edward Moya, analyst at OANDA, adding that China will be the main focus in the first trimester.

Most analysts expect oil demand to rise significantly in the second half of the year as health restrictions ease in China and central banks slow the pace of their rate hikes.

The impact of Western sanctions targeting Russian oil should be minimal, according to the survey.

“We do not expect any impact from the Russian crude price cap, which was designed to give bargaining power to third-country buyers,” Goldman Sachs analysts wrote in a note.

Russian President Vladimir Putin signed a decree last Tuesday prohibiting from February 1 and for five months the export of Russian oil to countries that have imposed a tariff cap.

“In the event of a severe drop in Russian exports (which we do not expect), OPEC + (the Organization of the Petroleum Exporting Countries and its allies, editor’s note) will probably be ready to increase its production to prevent prices from rising too much. high,” said data and analytics firm Kpler.

(Brijesh Patel in Bangalore, Laetitia Volga, edited by)

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