A new price increase is expected from the oil market – Newspaper Kommersant No. 238 (7439) of 12/22/2022

In 2023, commodity markets may face the consequences of a lack of investment, Goldman Sachs analysts write in their review. They note that even a significant rise in prices at the beginning of the year did not lead to an increase in investments in raw materials projects – the main obstacle to this was a sharp increase in rates by central banks, which caused an increase in the cost of borrowing. The reduction in stocks that has taken place also heightens the risks of significant fluctuations in commodity prices. However, analysts believe that the impact of this factor will be less pronounced next year due to slower growth in rates.

Recall that the current fall in commodity prices, including oil (the cost of Brent in mid-December fell to almost $75 per barrel, later returning to levels above $80), caused by concerns about the state of the global economy next year. Goldman Sachs, however, expects growth in business activity in China amid the easing of coronavirus restrictions. The bank’s analysts also believe that the US Federal Reserve will slow down the pace of policy tightening, and link the possible next “rally” in the oil market precisely with the recovery of demand in China (not excluding a possible price correction before growth).

The current level of oil prices takes into account the preservation of Russian production and lower demand in China, analysts say. They proceed from the fact that the supply of oil (taking into account restrictions on supplies from the Russian Federation – it is expected to reduce production by 600 thousand bpd) will grow by no more than 1.1 million bpd, while demand – by 2 million bpd with. Such an imbalance will lead to the most significant increase in the role of OPEC since the creation of this organization, the authors of the review warn.

Note that the consensus forecast of experts surveyed by Focus Economics assumes that the ECB and Fed rates in 2023 will remain at levels close to the rates of the end of this year, as well as maintaining the cost of Brent at a level above $90 per barrel. The International Energy Agency does not rule out an increase in oil prices as the market balances closer to the spring of next year, however, they indicate the need for a full assessment of the consequences of the European embargo and the price ceiling for Russian supplies – the agency’s December forecast provides for a reduction in Russian production next year by 1.4 million bpd.

Tatyana Edovina