(BFM Bourse) – Research offices see the barrel of Brent at between 100 and 115 dollars in 2023. The reopening of the Chinese economy could support demand, while supply risks suffering from tensions and a beginning of a decline in production in Russia.
The year 2022 may finally turn out to be half fig half grape for oil. Since January 1, Brent North Sea has lost 2.3%
. The WTI side in New York gives him 4.8%.
Prices were driven up at the start of the year by tensions linked to the conflict in Ukraine. Oil thus hit a peak close to 140 dollars a barrel in March. In mid-June, Brent was still moving well above $120. But prices then fell to the point that today Brent is trading below 80 dollars (76 dollars), undermined in particular by the deterioration of the economic situation.
But the situation could well change next year, according to the projections of various financial intermediaries. Pictet Wealth Management expects a barrel of Brent at 115 dollars at the end of 2023. UBS anticipates a barrel of Brent at 110 dollars from next March, while Bank of America sees it rising to 100 dollars on average over the year. “There are upside factors but also downside for oil next year”, nuance Raphaël Dubois, oil and gas analyst at Société Générale. “We have the working hypothesis of an average price of Brent of 85 dollars per barrel, which remains cautious” but “we must remember that the market is experiencing staggering volatility”, he explains.
The reopening of China as an X factor
The recovery of economic activity in China, where the authorities significantly eased health restrictions linked to the zero-Covid policy this week, is the most important catalyst cited by financial intermediaries.
UBS expects China’s gross domestic product to grow 5% next year and expects the country’s lockdowns to end permanently in the third quarter of 2023. Which means strong growth in demand from the second world economy could occur in 2023. “We must not forget that over the next year there will be significant stress on the oil market, in particular if China were to reopen”, underlined last week on BFM Business Benjamin Louvet, commodity manager at OFI Asset Management.
In addition, the members of the OECD currently find themselves with a level of strategic reserves “at the lowest for 18 years”, recalls Benjamin Louvet. UBS thus estimates that several countries in Europe or Asia could restock crude in order to respect the obligation to hold strategic reserves representing 90 days of imports.
More broadly, on the demand side, “recession risks are clearly the downside for next year, as oil remains the lubricant of the whole economy, it is found everywhere, whether in fuels or consumer goods”, judges Raphaël Dubois.
However, demand is expected to remain on the rise next year. “Oil consumption is currently at 100 million barrels per day. It remains structurally on an upward slope, and years of sharp decline are very rare (financial crisis of 2008, Covid in 2020). For now, the central scenario remains that of a small increase in global demand, despite the risks of recession. But we cannot exclude a drop if this recession proves to be too brutal”, develops Raphaël Dubois.
Limited capacities on offer The offer remains constrained and could find itself under pressure. In an interview at FinancialTimes
in early October, the managing director of the Saudi major Saudi Aramco, Amin Nasser, issued a warning about production capacities.
Due to underinvestment in the sector, spare capacity remains “extremely low” and could be “completely eroded” if China were to reopen its economy, he explained. According to Pictet Wealth Management, several members of OPEC+ (the Organization of the Petroleum Exporting Countries and their allies), such as Nigeria, Angola and Mexico, are already struggling to meet their quotas, precisely because of under-investment. in production.
“Oil is a somewhat capricious raw material, that is to say that if you do nothing, an oil well will give less and less oil, so if you do not invest you cannot to maintain your level of production”, reminds Benjamin Louvet on this point. This is called the so-called “natural depletion” phenomenon.
Russia under pressure
Regarding the European Union’s embargoes on Russian crude, which came into effect on December 5, and on refined products, which will be effective from February 5, Bank of America expects that these measures will lead Russia to deliver more to more distant emerging countries, such as India, China or Brazil. “Extended travel times for Russian cargo, coupled with ship-to-ship transfers and other factors, could put a strain on tanker fleets,” warns the US bank, which fears supply losses .
“Western sanctions on Russia should have the effect of causing a drop in Russian oil production. Not so much in terms of trade embargoes, because Russia will be able to sell its crude oil to other countries, such as Indonesia or India. But more in terms of production infrastructure,” said Raphaël Dubois.
“If Russia encounters any technical difficulty, it will not be able to benefit from the spare parts or the engineering expertise of the large Western companies. This is what has been observed for Iran and Venezuela, which have they too have been hit with sanctions,” he continues. “We could see the first effects of this phenomenon as early as next year with a potential drop in Russian production”, considers the Societe Generale analyst.
For their part, the United States, “should only increase their production modestly because the large producer groups believe that the environment is not conducive to increasing their investments”, anticipates Raphaël Dubois.
In this globally bullish environment, sector stocks could benefit from buoyant winds. “The oil majors should post excellent financial results again next year, while strengthening the strength of their balance sheets and accelerating their investments in the energy transition. Moreover, their valuations are very attractive. for managers to ignore these assets over a year, it will be difficult to do without them again in 2023″, warns Raphaël Dubois. As for oil services companies, they “should benefit from the resumption of investment by major producers in the Middle East”, he adds.
The courses were stopped Friday, December 9 at the beginning of the afternoon.Julien Marion – ©2022 BFM Bourse
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