Brent futures market closed today - here are the likely drivers for this week

ICE Brent futures market is closed for trading today. The futures contract gained over 15% in 2022.

PHOTO: Getty Images

Upward pressure:

Energy experts have predicted that tight supply due to increased Chinese demand and reduced Russian production will push Brent above $100/bbl this year.

OPEC and the International Energy Agency (IEA) have forecast increased global oil demand this year, led by a potential upside from China. 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 this year if China’s reopening spurs demand, while UBS commodity analyst Giovanni Staunovo has predicted a price of +$100/bbl.

"Weak demand seems to be the least of our worries" in 2023, writes energy expert Dan Eberhart in Forbes, as the return of Chinese demand will massively boost Brent prices. He also adds that “the Biden administration is not in a strong position to respond if oil prices shoot up again.”

According to Eberhart, Brent is "an excellent place for investors in 2023," as supply disruptions will drive prices upward in the second quarter, despite potential economic headwinds.

Downward pressure:

Canadian TC Energy has announced that the affected section of the Keystone Pipeline that runs through Kansas to Cushing, Oklahoma in the US has resumed crude flows. TC Energy shut the entire Keystone Pipeline on 7 December, after an oil leak of about 14,000 bbls was detected in a creek in Washington County in Kansas, US.

According to S&P Global's commodity outlook for 2023, US shale production will rise by around 1.4 million b/d in 2023 after rising about 1 million b/d in 2022. This will be a "golden year" for refiners, it says, with US refining margins expected to be strong.

Starting the new year on a somber note, the International Monetary Fund's (IMF) chief has warned that one-third of the world will see a recession this year. In an interview with CBS, IMF managing director Kristalina Georgieva warned that “2023 will be tougher than the year we leave behind… because three big economies – the US, EU, and China – are all slowing down simultaneously.”

Nations across the world are adding Covid restrictions on Chinese travellers, given China's extreme spike in Covid-19 cases after it backtracked on its zero-Covid policy. 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 this year.

By Konica Bhatt

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