The global oil market is set to witness a surge in prices to $90 per barrel this year, buoyed by the ongoing production cuts by OPEC+ and the resurgence of demand from China, according to a recent Reuters poll.
The survey, which gathered opinions from 40 economists and analysts, forecasted that Brent crude oil will average $87.12 a barrel in 2023, up from the previous consensus of $86.49 in March and the current levels of around $78.
Meanwhile, West Texas Intermediate (WTI) U.S. crude oil is projected to average $82.23 a barrel in 2023, up from the previous month’s consensus of $80.88.
Matthew Sherwood, the lead commodities analyst at EIU, emphasized that “The main factors driving prices this year will be OPEC production cuts, the comparatively limited supply response from U.S. producers, and demand developments in China.”
According to the poll, the OPEC+ production cuts, the Western sanctions on Russian oil, and the limited supply response from the U.S. producers will keep the global fuel demand growth tight, challenging the market to grow at about 1 million-2.2 million barrels per day in 2023.
The rebounding demand from China, which is the world’s second-largest oil consumer, will also play a significant role in driving up prices. More than half of the upside for Brent crude prices is expected to come from China, as the country continues to ramp up its economic activity.
Despite the concerns of an economic downturn in the West, which has led to growing fears of recession in the United States and Europe, the poll revealed that a return above $100 a barrel seems unlikely.
Carsten Fritsch, the senior commodity analyst at Commerzbank, emphasized that “the market currently underestimates the impact of production cuts, which will lead to a significant supply deficit in H223.”
However, the oil industry seems set for a bright future, with oil prices expected to rise to $90 per barrel this year. The OPEC+ production cuts and China’s rebounding demand are the main driving forces behind the price surge, while the limited supply response from the U.S. producers and Western sanctions on Russian oil are expected to keep the global fuel demand growth tight.
