A choppy 2022 for Brent will end annual gains

Front-month ICE Brent has climbed up by $2.33/bbl on the day, to $83.78/bbl at 09.00 GMT. The futures contract has gained over 15% this year.

PHOTO: Brent crude has gained nearly 6% this year. Getty Images

Upward pressure:

Comments and predictions on Brent for 2023 will be relevant to watch on the last trading day of the year. Energy experts have predicted that tight supply due to increased Chinese demand and reduced Russian production will push Brent above $100/bbl next year.

OPEC and the International Energy Agency (IEA) have forecast increased global oil demand next year, led by a potential upside from China. According to analysts at S&P Global, oil demand from the world's top importer will reach 15.7 million b/d in 2023, a 700,000-bbl increase from 2022.

Bank of America expects Brent to average $100/bbl next year, while Morgan Stanley predicts $110/bbl by mid-2023.

S&P Global vice chairman Dan Yergin has told CNBC that Brent could reach $121/bbl next year as China fully reopening will generate a lot of demand, while UBS commodity analyst Giovanni Staunovo has predicted a price of +$100/bbl in 2023.

The Energy Information Administration (EIA) has forecast Brent to average at $92/bbl next year as global oil inventory declines. Although this is lower than other forecasts, it still indicates a potential upside.

Downward pressure:

Commercial US crude oil stocks increased by 718,000 bbls to 418.95 million bbls in the week ending 23 December, according to the official EIA data. The stock build ran counter to the American Petroleum Institute's (API) earlier projection of a 1.3 million-bbl draw.

The unexpected rise in US crude oil inventories coupled with the reports of refineries in Texas restarting operations after winter storms caused disruptions is likely to cap oil price gains.

Given China's extreme spike in Covid-19 cases after it backtracked on its zero-Covid policy, the reopening its international borders has met with lukewarm reactions across the globe. Despite expectations that China's oil demand will rise next year, tightened global restrictions on Chinese travellers and fears of a Covid-19 re-emergence can dampen this optimism.

"The lack of clarity over the virus situation in China has prompted some new travel rules from various countries, which could serve as some dampener for previous optimism," said Jun Rong Yeap, market strategist at IG.

By Konica Bhatt

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