Global oil prices expected to remain high next year
Global oil prices will remain high for all of the year 2023, the U.S. Energy Information Administration (EIA) forecast on Tuesday.
Despite the recent drop in crude oil prices due to market concerns about global economic growth, the Brent crude oil price is expected to average 92 U.S. dollars per barrel in 2023, the EIA said in its December Short-Term Energy Outlook (STEO) report.
Brent crude oil prices averaged 91 dollars a barrel last month and are on pace to average 101 dollars in 2022, said the report.
Oil prices dipped on Monday as upbeat U.S. economic data rekindled concerns over aggressive rate hikes by the Federal Reserve. Brent crude for February delivery dropped 2.89 dollars, or 3.4 percent, to close at 82.68 dollars a barrel on the London ICE Futures Exchange.
Global oil inventories are expected to fall by 0.2 million barrels per day in the first half of 2023, which will push Brent prices back above 90 dollars a barrel by the beginning of the second quarter of next year, according to the report.
In the EIA forecast, U.S. refinery utilization remains near its five-year average through 2023.
The EU’s ban on seaborne imports of petroleum products from Russia will create supply and price uncertainty for distillate markets in early 2023. Partly as a result, U.S. diesel refining margins will decline by 19 percent in 2023 compared with 2022.
The STEO report also expects the possibility of natural gas price volatility remaining high, raising its forecast for U.S. natural gas production by almost 1 percent in 2023 compared with last month’s forecast.
U.S. natural gas prices are forecast to surge from November levels as a result of both higher winter natural gas demand and rising LNG exports, and then begin declining after January as U.S. storage levels move closer to the previous five-year average, largely as a result of rising U.S. natural gas production.
The highest forecasted electricity prices for this winter are in ISO New England, where on-peak wholesale power prices are expected to average more than 200 dollars per megawatthour in January, up 35 percent from January 2022.
Capacity constraints on pipelines delivering natural gas into New England make it likely that wholesale electricity prices will be set by relatively expensive imported LNG or fuel oil, said the report.
The December STEO includes a contraction in U.S. economic activity till the end of March, as a result of uncertainty in macroeconomic conditions which could significantly affect energy markets.
Based on the S&P Global macroeconomic model, U.S. GDP will remain flat in 2023, the report assumed.