Wednesday, 06 December 2023 | 20:24
View by:

What is behind projections of falling oil prices?

Wednesday, 25 January 2023 | 01:00

Oil prices are falling. Now many experts expect the trend to continue over the next two years, with significant uncertainties ahead.


The U.S. Energy Information Agency (EIA) forecast earlier this month that the average Brent crude oil price would decrease from 100.94 U.S. dollars per barrel in 2022 to 83.1 dollars in 2023 and 77.57 dollars in 2024.

Similarly, a Reuters 2022 year-end poll of 30 economists and analysts projected the international crude benchmark Brent to average 89.37 dollars per barrel in 2023.

Already, Brent’s monthly average price fell by 34 percent from 122.71 dollars per barrel in June to 80.92 dollars per barrel in December last year.

The market sentiment is believed to be caused by slower oil demand growth due to a weak global economic recovery, and relatively ample non-Organization of the Petroleum Exporting Countries (OPEC) supply growth to replace potential Russian production loss, though OPEC and its allies, known as OPEC+, are trying to reverse the trend through its pricing power.


The ongoing weakening of the oil market is “definitely driven by the demand side this time,” Abhi Rajendran, director of research at Energy Intelligence, a leading energy information company, told Xinhua recently.

The EIA estimated that facing headwinds for global economic recovery, the global demand for liquid fuels may only grow by 1 percent from 99.43 million barrels per day (b/d) in 2022 to 100.48 million in 2023, and by 1.7 percent to 102.2 million in 2024.

On the supply side, the EIA said that due to a production surge particularly in non-OPEC producers, the global liquid fuels supply would grow by 1.1 million b/d in 2023 and 1.7 million b/d in 2024, which is expected to compensate for an estimated 1.5 million b/d of Russian production decline due to sanctions.

Meanwhile, the latest predictions of Russian production loss by both the EIA and OPEC are significantly lower than the initially EIA-estimated 3 million b/d, analysts noted.

The EIA expected Russia’s production of petroleum and other liquid fuels to decrease from 10.9 million b/d to 9.5 million in 2023 and 9.4 million in 2024 due to the sanctions.

OPEC projected a much smaller decline of Russian annual oil production from 10.8 million b/d in 2021 to 10.2 million in 2024.

Though Russia’s loss has been limited so far, experts noted that new sanctions may lead to a further decline this year.

A price cap on Russian seaborne crude at 60 dollars per barrel agreed by the European Union, the Group of Seven nations and Australia came into effect last month. Russian crude has been trading at a significant discount to Brent by as much as 30 dollars per barrel.


In response to fast-changing market conditions, OPEC+ countries, led by Saudi Arabia and Russia, in recent years have held frequent meetings to coordinate production adjustment.

In April 2020, when the COVID-19 virus spread all over the world, OPEC+ decided to cut production of more than 7 million b/d, ushering in a 26-month Brent price hike from then 18.38 dollars per barrel to 122.71 dollars per barrel in June last year.

Responding to the three-month Brent price falling since June last year, OPEC+ again decided in October to reduce output by 2 million b/d, much to the disappointment of the Joe Biden administration struggling with high inflation when the 2022 U.S. midterm elections were only one month away.

The situation added a “significant geopolitical premium to oil price that the market has not seen for quite a while,” Andrew Dittmar, an analyst at Enverus, an energy software service company, told Xinhua.

OPEC oil production stood at 34.18 million b/d in 2022, making up about 34 percent of the global total, data from the EIA showed. In the long run, OPEC projected that its market share could be maintained at one-third up to 2030 and be increased to 39 percent by 2045.


Forecasting oil prices is very challenging since too many uncertainties lie ahead, experts have warned.

Answers remain unknown as to whether there will be more harsh sanctions on Russia’s oil exports, whether infrastructure constraints and other bottlenecks will hold back the U.S. oil production surge, and whether Venezuela and Libya can meet their expectations in oil production hike.

The year of 2023 is expected to be the beginning of a global commodity market rebound, to which energy security and policy remain key risks, analysts at S&P Global Commodity Insights said last month in their 2023 energy outlook.

“It’s a policy-driven future for energy markets, which will foster uncertainty and volatility,” said Shin Kim, head of Oil Supply and Production Analytics with S&P Global Commodity Insights.

As for the global oil demand growth, “how China’s economy will recover in 2023 will be critically important,” Dittmar said.

The average monthly Brent price for the past decade has been around 74 dollars per barrel. Now it’s wait-and-see whether OPEC+ could use its market power to arrest the ongoing oil price slide.
Source: Xinhua

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping
Next article
Back to list
Previous article

Newer news items:

Older news items: