In 2023, $100 Crude Oil and Gas Prices Set to Increase Again
The price of crude oil ended 2022 at the same level as it started in the year, despite the many factors that have disrupted global energy markets over 12 months.
West Texas Intermediate (WTI). crude oil In 2022, the New York Mercantile Exchange reported a 4.5% increase in oil prices to around $79 per barrel. Brent, the international benchmark for oil prices, climbed roughly 8 percent, to around $84 per barrel on London’s ICE Futures exchange.
The U.S. and Brent contracts had soared to as much as $130 and $127, respectively, this past spring amid Russia’s invasion of Ukraine. However, oil prices had lost their gains from postwar times by the end of the fourth quarter.
Russia and Europe
The international energy market was devastated by the conflict in Eastern Europe, which led to higher prices for petroleum products worldwide. As a result, Western governments have pledged to transition away from Russian oil and gas by building vast stockpiles, instituting a price cap on Moscow’s exports, and renewing consumption of nuclear power, coal, and natural gas.
So far, this has not led to the bloc’s desired effects.
Russia responded to the price caps on oil exports and confirmed that it would stop shipments to countries that were violating its terms. “directly or indirectly use the mechanism of setting a price cap.”
Ipek Ozkardeskaya is a senior analyst at Swissquote Bank and believes that the price caps will have negligible impact on oil prices.
“Why? Because most countries that are pointed by Putin’s finger have already stopped the majority of oil imports from Russia,” She wrote. “Plus, the Russian crude is already trading below the $60 per barrel price cap—meaning that there is no direct implication on the Russian supply, at least in the immediate future.”
Although energy prices have been declining in recent weeks, they are still high. Officials have warned against the European Commission’s plan to install price controls on natural gas, which could exacerbate the region’s energy dilemma. The United States is also a major importer to the region, surpassing the Asian continent.
In addition, President Vladimir Putin has shifted the country’s broader energy strategy by shipping greater volumes to Asia and bolstering relationships with China, India, and Saudi Arabia.
How did the US respond?
Even though prices have risen, the U.S. Energy sector has not increased its output significantly as it is still below prepandemic levels. According to the Energy Information Administration (EIA), the industry produced 11.7million barrels a day (bpd), in January’s first week.EIA). The December end saw 12 million bpd.
President Joe Biden engaged in a war with oil and gas companies.
The administration has repeatedly claimed The sector holds 9,000 drilling permits. But the fossil fuel industry has disputed the White House’s assertions, purporting that there are many challenges that producers need to overcome, such as attracting capital, fighting litigation by environmental organizations, and tackling red tape that results in delays.
“While we may not appreciate the cynical attempt to deny the effects of the president’s own ‘no federal oil’ policies, we appreciate that the White House suddenly wants American producers to develop on federal lands. After the Biden administration spent over a year making it more difficult to develop on federal lands while begging Russia to increase its production, the admission—no matter how long it took to make—that American production is preferable to Russian is now welcome,” Kathleen Sgamma (president of Western Energy Alliance), made the statement in March. “We also appreciate that suddenly environmental groups are very keen for us to develop on existing leases and permits, as they constantly sue to stop any development.”
The rally in crude oil markets and refinery problems raised gasoline Prices reached $5 per gallon in June. Diesel prices have also increased to $6. The dramatic rise in diesel prices has prompted President Biden to announce a six month plan to release 180,000,000 barrels from the Strategic Petroleum Reserve.
The Energy Department announced Although it purchased three million barrels of oil this month, the country’s emergency oil stockpiles are still being depleted. Since President Biden assumed office, more that 41 percent of SPR has been destroyed, falling to 375 million barrelsThe lowest since December 1983, at –
According to the American Automobile Association, gasoline prices fell 38 percent since their peak in 2012.AAA). Diesel also fell to $4.68 this year, down 23 percent from the high.
The White House is responsible for this notable drop. The notable drop in oil consumption was also due to global recession fears and falling Chinese demand.
Natural gas prices experienced a rapid ascent up to December’s saleoff before losing nearly all their gains in just the last weeks of 2022.
Natural gas prices soared by 14 percent this year on the New York Mercantile Exchange. They topped $4 for every million British thermal units (Btu). In August, natural gaz hit an intraday record high of $10 Btu.
The European natural gas futures market was advanced In August, the benchmark Dutch Title Transfer Facility was running at $300 per megawatt-hour. Prices have dropped to $85.
Many factors contributed to the energy commodity’s rally in 2022: a brutal winter in North America and Europe, the Russia–Ukraine conflict, lackluster natural gas infrastructure in the United States, soaring liquefied natural gas (LNG) exports, and a severe lack of storage in Europe.
In general, the futures market has declined amid severe weather predictions suggesting In January, temperatures were higher than normal. The U.S. has produced a strong amount of LNG in recent months. It averages about 100 billion cubic yards per day. It helped that Freeport LNG is now available. delayed the restart of the nation’s second-largest LNG export facility, which has allowed more natural gas to flow throughout the United States.
The 2023 Energy Tea Leafs:
The best way to sum up what could happen in 2023 is perhaps tightness. Many forecasts for next year indicate that oil markets worldwide will be tight. However, they could slip into deficit.
“A combination of lower Russian oil supply and OPEC+ supply cuts means that the global oil market is expected to tighten over 2023,” Warren Patterson, head of commodities strategy at ING wrote this in a note. “We expect a growing deficit over the course of the year, which suggests that oil prices should trade higher from current levels.”
ING predicts Brent and WTI to reach $104 and $101 per barrel, respectively, by 2023.
According to the EIA’s Short-Term Energy Outlook (STEO(December report) Brent crude oil prices will average $92.36 per barrel, down $3 from November’s report. U.S. crude output would rise to 12.34million barrels per day, an increase of 11.87 million barrels per day. Retail prices for gasoline would rise to $3.51 per gallon.
The Organization of the Petroleum Exporting Countries (OPEC) thinks global oil demand growth will be robust over the next year, amid the relaxation of China’s zero-COVID public health policies. According to the 15-nation group, world oil demand is expected to rise by 2.3 percent (or 2.25 million barrels per day) in 2023.
“Although global economic uncertainties are high and growth risks in key economies remain tilted to the downside, upside factors that may counterbalance current and upcoming challenges have emerged as well,” In the report, OPEC stated (pdf).
In response to falling prices in October, OPEC+ and its allies, OPEC+, slashed their output by 2,000,000 bpd. This sparked a fierce debate. reaction Biden warns that there will be “consequences” For the entity.
Phill Flynn (an energy strategist and the author of The Energy Report) stated to The Epoch Times, “OPEC doesn’t have any spare production capacity.” This means that it won’t waste more oil as the global economy slows down.
“I think OPEC was playing their cards,” He said. “I think they’re looking at it as more of market management. The Biden administration was the one that got involved in the manipulation of the market by releasing oil. They’re the ones that tried to intervene in the market more than OPEC did.”
Flynn also noted that Flynn is currently “very bullish on prices going into the new year” amid “significant” Supply shortages are cited as a reason for the historically low global spare production capacity.
Flynn believes that investors might be surprised to hear about China opening its economy and reviving imports, despite concerns of global recession.
Indeed, the world’s largest oil importer has seen lower U.S. crude purchase amid its public health restrictions which decimated national economy in 2020.
Goldman Sachs trimmed The oil price forecasts of the Wall Street titan for 2023 suggest a market surplus. The Wall Street titan expects Brent to trade at $90 in the first quarter, $95 in the second quarter, and $100–105 per barrel in the second half of 2023.
Mina Tadrus, CEO of Tadrus Capital, an investment management company, believes Russia could still exert a tremendous influence on the global oil and natural gas markets in 2023.
“Russia’s influence on the energy market extends beyond just its role as a producer and exporter. It is also a major transit country for energy, with pipelines running through its territory to deliver oil and natural gas to other countries,” Tadrus spoke to The Epoch Times. “Overall, Russia’s role in the global energy market is complex and multifaceted. Its influence is felt through its production and export of oil and natural gas, its participation in OPEC and other international organizations, and its role as a transit country for energy. As a result, developments in Russia can have significant impacts on the supply and demand of energy commodities, as well as on prices.”
According to Rob Thummel (Tortoise senior Portfolio Manager), natural gas prices could trade between $5-6 in 2023.
“The U.S. is forecasted to grow natural gas production reaching record levels that should help keep U.S. prices rangebound between $5 to $6 per mcf in 2023,” He said this in a Tortoise Ecofin QuickTake podcast. “The outlook for Europe is a bit more challenging as Europe looks for alternative sources of natural gas to replace Russian volumes. Europe and Asia are expected to compete for global liquified natural gas, so European prices will likely remain at least six times higher than in the U.S.”
There could be some resistance in 2023 because of mild temperatures and lower heating days in many areas of the lower 48.
“Natural gas got crushed on the big thaw! Got to love warm weather unless you’re long natural gas,” Flynn stated In a note dated Dec. 30.
In total, U.S. supplies The EIA reports that natural gas reserves are at 3.112 billion cubic feet. This is 133 billion more cubic feet than a year ago. It also stands 85 billion cubes below the five years average.
EIA forecasts that natural gas prices will average $5.43/Btu with U.S. LNG exports exceeding 12.25 billion cubic feet daily.
Andrew Moran is a writer who has been writing for more than ten years about finance, economics, business and other topics. He is also the author of “The War on Cash.”
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