empty
03.01.2023 11:03 AM
Lower oil prices for 2023

2022 was a year of increased volatility and market division for oil to those who buy from Russia and those who refuse it. Brent ended it at +4%, a far cry from the triple-digit gains at the beginning of the armed conflict in Ukraine. The trading range for the North Sea grades was $64–$139 per barrel, the widest since the 2008 global economic crisis. What's in store for oil in 2023?

Despite its rally at the turn of the year, Reuters experts are pessimistic, at least for the first few months of 2023. They lowered the median estimate of the average Brent price by 4.6%, from $93.65 in November to $89.37 per barrel in December. In 2022, the figure was $99. Such forecasts suggest that the downward trend in the North Sea variety is likely to continue. And there are justifications for this.

Dynamics of forecasts for Brent

This image is no longer relevant

The main reasons for the further fall in oil prices are the aggressive tightening of monetary policy, which will lead to a recession, and the difficulty of opening China's economy in conditions of increased infection and mortality. According to the head of the IMF, Kristalina Georgieva, the simultaneous slowdown of three whales, the United States, the eurozone, and China, indicates that a third of the world economy will face a recession in 2023. In the language of fundamental analysis, this means lower oil demand and lower prices.

The fact that China is having a hard time fighting COVID-19 is evidenced by the slowdown in December manufacturing activity from Caixin from 49.4 to 49. The index has been below the critical mark of 50, which signals a contraction in GDP for five consecutive months.

As for potential production cuts that could support Brent, Reuters experts do not expect any breakthrough in this area in the new year. In their opinion, the Western sanctions will have a limited impact on the Russian oil supplies, as the process of reorientation of its flows from the West to the East is under way, and the price ceiling of $60 per barrel is too high to speak about a sharp reduction of the oil production in Russia. Thus, the main grade Urals currently trades at $42, including due to high transportation costs.

Dynamics of offshore flows of Russian oil

This image is no longer relevant

In addition, if Russian oil production drops sharply, OPEC may increase it to limit the rise in prices.

This image is no longer relevant

However, in the second half of 2023 the situation might change dramatically. The recovery of the Chinese economy will inflate the oil demand. As, however, the termination of the cycle of tightening monetary policy with a potential "dovish" reversal of the Fed.

Technically, the implementation of the 1-2-3 pattern takes place on the Brent daily chart. We keep the long positions formed due to this, but as we approach the previously announced targets of $86.4, $87, and $89.2 per barrel, we fix profits and look for signals for a reversal.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

Gold continues to rise as investors remain concerned about U.S. President Donald Trump's aggressive trade policy and its impact on the global economy. In addition, ongoing geopolitical tensions serve

Irina Yanina 13:22 2025-04-02 UTC+2

AUD/USD: Analysis and Forecast

Today, the AUD/USD pair is showing positive momentum, rebounding from nearly a four-week low. Support has come from the Reserve Bank of Australia's less "dovish" stance, with the central bank

Irina Yanina 12:25 2025-04-02 UTC+2

Markets May React to New U.S. Tariffs with Growth—But Under One Condition... (GBP/USD Downside and USD/CAD Upside Possible)

The day Donald Trump declared "Liberation Day" has arrived. Markets are bracing for the U.S. to introduce comprehensive and large-scale tariffs on its trade partners and potential retaliatory measures from

Pati Gani 09:51 2025-04-02 UTC+2

The Market Needs Proof

It's too late to be afraid. Rumors are circulating in the market that the White House may implement a universal 20% levy instead of reciprocal tariffs—pushing the average import duty

Marek Petkovich 09:16 2025-04-02 UTC+2

What to Pay Attention to on April 2? A Breakdown of Fundamental Events for Beginners

There will be very few macroeconomic events on Wednesday, but yesterday showed us that even a large number of macro reports do not always trigger significant movement—even within

Paolo Greco 06:25 2025-04-02 UTC+2

GBP/USD Pair Overview – April 2: The Pound Still Stuck in Place

The GBP/USD currency pair continues to trade in a flat range. On the 4-hour timeframe, this is a classic flat; on the lower timeframes, it looks more like a "swing."

Paolo Greco 05:14 2025-04-02 UTC+2

EUR/USD Pair Overview – April 2: The Dollar Gets Unlucky Again

The EUR/USD currency pair continued trading sluggishly and reluctantly on Tuesday. The market continued anticipating new tariffs from Donald Trump, even though the macroeconomic background was very strong yesterday. While

Paolo Greco 05:13 2025-04-02 UTC+2

Bitcoin caught in bull trap

The bottom shows no strength, the top has no desire. Even the so-called "smart money" is not rushing to buy Bitcoin, citing a confluence of negative factors. Tepid trading activity

Marek Petkovich 15:58 2025-04-01 UTC+2

USD/JPY. Analysis and Forecast

Today, the USD/JPY pair is struggling to benefit from a slight intraday upward movement, especially amid expectations that the Bank of Japan may raise interest rates at a faster pace

Irina Yanina 11:37 2025-04-01 UTC+2

US stock market: bad news fully priced in

The S&P 500 had its worst quarter in three years. Investors are shifting capital from North America to Europe. Once-booming US tech stocks have collapsed. Major banks and respected institutions

Marek Petkovich 09:13 2025-04-01 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.