BAKU, Azerbaijan, November 18. For the remainder of 2022, oil prices are set to remain above the floor level of USD90.0/bbl, Trend reports with reference to Fitch Solutions.
“We could see a short-term oil price rally supported by tight global energy markets, a seasonal strengthening in demand and further declines in Russian exports. We now expect oil prices to average at USD102/bbl in 2022 and USD95/bbl in 2023, however we recognize risks to our forecast. On the supply side, Russian output and exports due to upcoming EU ban in seaborne imports and proposed price cap, constitutes the key risks. Although Russia has managed to some extent displace its supply away from Europe through higher exports to India, China or Turkiye over 2022, a key unknown remains the effect of the proposed G7 price cap on Russian oil. We currently expect Russia to see oil production output declining by 9.1 percent y-o-y in 2023,” the company said.
Fitch Solutions’ experts note that Brent prices are moving in a USD90-100/bbl channel over Q422 in line with our near-term forecast.
“In the last few months, we have seen a softening in Brent prices, driven by increasingly bearish market sentiment amid deteriorating macroeconomic environment. In the immediate aftermath of the Russian invasion of Ukraine, Brent prices tested USD140/bbl levels in early March 2022 driven by supply side fears. Brent prices had pared back most of those gains declining to USD85/bbl in early September. In Q322, the demand fears remained a key bearish factor for the market with lingering uncertainty over the Chinese recovery amid mixed messaging around the Zero-Covid policy,” said the company in its latest report.
Fitch Solutions notes that the price recovery from the September lows was mainly supported by OPEC+, which has committed to an additional 2mn b/d cut, effective in November 2022 and extending the cut deal from December 2022 to December 2023.
“Although the effective cut is expected to be considerably smaller, as key producers are currently producing well below set quotas. The commitment to limit global supply has sent a signal to the market that OPEC+ will continue to intervene on the market and put a floor under oil prices next year.”
---
Follow the author on Twitter: @Lyaman_Zeyn