(MENAFN– Gulf Times) The oil price is turning bullish on solid Chinese rebound and Russian supply losses, the National Bank of Kuwait said in a report.
NBK consensus estimates see oil prices ranging higher to average $91 per barrel in 2023, although oil prices traded sideways for most of January before retreating on global economic uncertainty.
The International Energy Agency (IEA) estimates that China’s oil consumption is set to account for half of the 1.9mn barrels per day of global oil demand growth the agency forecasts this year, with demand for jet fuel (travel) and diesel (industry) greatly improved.
It expects world oil demand to reach a record high of 101.7mn bpd in 2023. This comprises a drop in oil demand of 0.8mn bpd quarter-on-quarter in Q1,2023 amid a contraction in industrial activity in Europe, followed by a rise through the remainder of the year to reach 103.5mn bpd by Q4,2023.
On the supply side, NBK noted the oil market is expected to tighten going forward, with the impact on oil market balances of the EU’s crude and refined products embargo on Russian oil supply greatest in the second half of the year.
The tightness in the diesel market could be especially acute. However, there is considerable variation among energy houses on the extent of Russian crude output curtailments in 2023, especially with the G-7 crude price cap seemingly achieving (so far) its intended purpose of reducing Russian oil export revenues without disrupting Russian supplies too much.
The IEA puts the decline at 1.3mn bpd on average from 2022’s level.
“The oil market is in a state of extreme flux, with uncertainty high and volatility elevated. The threat of a global recession hangs over the outlook in 2023,” NBK noted.
Nevertheless, it said international energy and research houses have in recent weeks nudged up their global economic, oil demand and oil price forecasts (to $91) for the year.
“We believe the balance of risks is to the upside, with prices expected to move higher on the back of rebounding Chinese demand, projected Russian supply losses, Opec+ supply restraint and underwhelming non-Opec output increases. The market should get materially tighter in the second half of the year,” NBK added.
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