1. Market review: WTI crude oil rose during the US session, and its price once approached 76 US dollars / barrel, and then gave up most of the gains, and finally closed down 0.2% to 74.68 US dollars / barrel; Brent crude oil closed down 0.01%, at $79.54 a barrel.
2. API crude oil inventories in the United States unexpectedly recorded an increase of 14.865 million barrels in the week to January 6, which was higher than the expected decrease of 2.375 million barrels, and the previous value increased by 3.298 million barrels.
3. The World Bank slashed its forecast for global economic growth this year, and lowered its forecast for global economic growth in 2023 from 3.0% in June last year to 1.7%, which is the third-lowest growth rate in the past 30 years, and warned that within three years second recession or to
4. The EIA short-term energy outlook report shows that global crude oil demand is expected to increase by 1.05 million barrels per day this year, and the average price of oil in the United States and Burundi has been greatly reduced by about US$9 to US$77.18 and US$83.1 respectively.
5. G7 officials revealed that the G7 seeks to implement two price caps on Russian oil products from February 5, one price cap is for oil products traded at a discount to crude oil, and the other is for oil products traded at a premium. Russian Ministry of Energy: is studying measures to limit the discount on Russian oil prices.
6. Norway has issued 47 new offshore oil and gas exploration licenses to 25 companies in the latest round of mature regional licensing, the Norwegian Energy Minister said on Tuesday.
There may be potential buying opportunities in crude oil. There is great optimism about China’s import quota adjustment and its impact on demand, but the weakness in the physical market may be because the oil market is waiting for demand to return after the Chinese New Year before a sustainable rebound. Combining this growth in demand with a possible OPEC+ production cut next month (expected to actually cut production by 400,000-500,000 b/d), the downside for oil prices is currently limited. Combined with the U.S. plan to start buying and storing in the first quarter, it is expected that the average price of Brent crude oil in 2023 will be US$90/barrel.
Crude oil edged higher yesterday, driven by a weaker dollar. Further support was also provided by growing optimism in the Chinese market. But the oil market will become increasingly tight over time. China’s expansion of crude oil import quotas and easing of restrictions means that the recovery in crude demand may be stronger than initially expected. With global oil demand expected to grow by 1.7 mb/d by 2023, 50% of which will be driven by China, there may be some upside risk to oil prices. Moreover, if Russia struggles to find buyers for its oil, it will have to start cutting production. Demand for Russian oil will fall further from February as the EU ban takes effect.
Manufacturing slowdown will weigh on oil prices
Oil is currently expected to be at $98/bbl, but if global manufacturing activity slows, our estimate would drop by $15-25/bbl. This means that crude oil demand is estimated to drop by 1-2 million barrels per day. We remain “constructive” on oil prices due to slowing US production growth, OPEC+ market reaction, and sanctions taking Russian crude supplies out of the market. However, the cyclical demand trend for crude oil is declining. From the fourth quarter of 2023 to the fourth quarter of 2024, Russian crude oil production is expected to decrease by 700,000 barrels per day. However, the reopening of China will boost some demand, which is expected to increase by 1.1 million barrels per day this year.
Economic uncertainty will continue
Some major economies will enter recession in 2023, and the global economy may decline and not recover until 2024. Global GDP will usher in the weakest expansion period since 2001, except for the contraction of the epidemic and the global financial crisis. On the supply side, the key risk remains Russia. However, early indications are that the direct impact of the EU crude oil ban on Russian crude oil exports will be minimal. In addition, tensions in the refining sector are expected to ease in the coming year. More than 1.4 million barrels per day of additional refining capacity planned to be fully operational in 2023 will increase crude oil production to meet demand for diesel and natural gas, easing the pressure the industry is currently facing.