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Oil demand to spike in the second half of 2023
Slowing global growth and concerns about a global recession have thus far outweighed worries about insufficient oil supply. Oil prices are forecast to average $92/bbl in 2023 and $80/bbl in 2024, down from a projected $100/bbl in 2022, according to the World Bank projections.
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By Phyllis MUCHOKI
Oil demand is expected to grow significantly in the second half of 2023, driven by the easing of COVID-19 restrictions in China and by central banks adopting a less aggressive approach to interest rates.
A survey of 30 economists and analysts by the media outlet, Reuters, forecast Brent crude will average $89.37 a barrel in 2023, about 4.6% lower than the $93.65 consensus in a November survey. The global benchmark averaged $99 per barrel in 2022.
Indeed, Brent has fallen more than 15 percent since early November and was trading around $84 a barrel as of last Friday as surging COVID-19 cases in China weakened the outlook for oil demand growth in the world’s largest crude oil importer.
“The oil market is still tight despite a weakening global demand outlook as recession fears run wild,” said Edward Moya, senior analyst with OANDA, adding that China will be the primary focus in the first quarter of next year, in an interview with the outlet.
Most analysts said oil demand will grow significantly in the second half of 2023, driven by the easing of COVID-19 restrictions in China and by central banks adopting a less aggressive approach to interest rates.
What is the highest the price of oil has ever been?
Historically, Crude oil reached an all-time high of 147.27 in July 2008.
The absolute peak occurred in June 2008 with the highest inflation-adjusted monthly average crude oil price of $172.05 / barrel.
Since 1976, the price of WTI crude oil has increased notably, rising from just 12.23 U.S. dollars per barrel in 1976 to a peak of 99.06 dollars per barrel in 2008.
Oil price increases are generally thought to increase inflation and reduce economic growth. In terms of inflation, oil prices directly affect the prices of goods made with petroleum products.
Oil prices indirectly affect costs such as transportation, manufacturing, and heating.
How do high oil prices affect companies?
A rise in crude oil prices can be worrisome for markets and investors. It means higher transport costs of goods and a rise in input costs for most industries.
When the price of oil rises, it can propel inflation, and to tame it, central banks across the globe may hike key rates, making borrowing an expensive proposition.