Oil prices poised to rally in 2023 as Russian exports fall: IEA

Global oil demand growth will slow next year but prices could rally as sanctions imposed by the EU and G7 constrict Russian supplies, the International Energy Agency said.

Russia’s oil output will fall by 1.4 million barrels per day (bpd) next year, further tightening balances as a December 5 price cap imposed by the G7, the European Union, and Australia takes effect seeking to curb Moscow’s wartime revenue, the Paris-based said in a report on Wednesday.

According to Opec, oil demand will grow in 2023 by 2.25 million bpd over next year to 101.8 million bpd, with potential upside from China, the world’s top importer.

Oil prices rose on Wednesday after Opec and the IEA both forecast a rebound in demand over the course of next year and as US rate hikes are expected to ease alongside slowing inflation.

Brent crude futures rose 76 cents, or 0.9 per cent, to $81.44 per barrel by 1144GMT, while US West Texas Intermediate (WTI) crude futures were up 80 cents at $76.19.

By the end of the first quarter 2023, Russia’s output is poised to plunge 14 per cent. If that forecast holds true, it could reverse the recent trend in oil futures, which have retreated to $80 a barrel in London after their worst weekly slump in four months.

“While lower oil prices come as a welcome relief to consumers faced by surging inflation, the full impact of embargoes on Russian crude and product supplies remains to be seen,” the IEA said. “As we move through the winter months and toward a tighter oil balance in the second quarter, another price rally cannot be ruled out.”

Russia’s output rose by 90,000 bpd in November to 11.2 million bpd, just 200,000 bpd below levels seen before Moscow sent troops into Ukraine.

Its output has consistently outstripped IEA predictions though lower global prices and steeper discounts on Russian oil meant Moscow’s revenue fell by $700 million to $15.8 billion, the IEA said.

— issacjohn@khaleejtimes.com