Gasoline prices to drop next year amid oversupply – Fitch Solutions

Oil&Gas Materials 16 February 2023 15:09 (UTC +04:00)
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, Feb.16. Gasoline price forecasts stand at USd270/gal for 2023, according to the estimations of Fitch Solutions, Trend reports.

As such, the prices remain high in comparison to the historical levels, while mark a decrease from 2022 figures. Fitch Solutions believes that demand will be the main factor affecting the gasoline prices this year.

Gasoline consumption dynamics will be different in developed and emerging economies in 2023. Developed markets will see a stable consumption, since the economic slowdown is balanced by lower fuel prices and slower inflation. This is while emerging markets will increase gasoline consumption this year: the year-on-year growth will rise from 2.2 percent in 2022 to 2.5 percent in 2023. Rising consumption in China amid reopening will be the main driver of the consumption growth, coupled with optimistic outlook for the economic growth of other emerging economies.

“The aggregate real GDP growth rate for the EMs is now estimated at 3.8 percent y-o-y in 2023, after a 3.6 percent y-o-y growth in 2022. The five largest EMs - China, India, Iran, Russia and Brazil – were responsible for almost 51 percent of the aggregate motor gasoline consumption in 2022. Out of this group, only Russia is expected to see a real GDP contraction in 2023, however even there gasoline consumption is set for a rebound in 2023 after a severe contraction of -12 percent in 2022,” reads the report.

Over the medium term, the prices for gasoline are expected to drop to USd238/gal in 2024 and USd234/gal in 2025 due to the oversupply.

Fitch Solutions expects gasoline crack spreads to normalize amid the oversupply in 2024, which will have a bearish effect prices. The crack spread peaked at USD25.7/bbl in 2022 after standing at USD10.4/bbl over 2017-2021.

“In the long term, the average crack spread is set to decline on the fundamentals and broader sentiment reaching the average of USD8.8/bbl between 2024-2027. For the long term, we maintain our view that the weakening demand among the DMs will likely see global gasoline price benchmarks declining. As energy transition efforts accelerate the demand for legacy fuels will diminish, in particular among the DMs,” the report says.

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