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Oil Price Rally: Will It Continue into 2023?

Oil prices have been on the rise recently, with a 4% increase last week and a gain continuing for four straight days this week. The upward trend is being attributed to tighter supplies of U.S. crude and heating oil, as well as increased demand for jet fuel ahead of the holiday season.

Oil Pump
Oil Pump

However, transport fuel consumption could decline if a severe storm forecast for the U.S. causes travel disruptions.

China's Independent Oil Refiners Benefit from Russian Oil Discounts

As sanctions from G7 member nations and the European Union (EU) target Russia's oil exports, the country has been redirecting its crude to Asia at discounted prices. China's independent oil refiners are taking advantage of this situation, negotiating significant price discounts on Russian oil and benefiting from increased profits. Meanwhile, India is also receiving Russian crude at discounted rates below $60 per barrel.

Oil Price Predictions for 2023

Some industry experts are optimistic that the current rally in oil prices could continue into 2023, with some predicting prices as high as $90 or $121 per barrel. S&P Vice Chairman Dan Yergin anticipates prices reaching $90 per barrel in 2023, with the potential to rise to $121 per barrel once China fully reopens from Covid lockdowns. However, there are still many uncertainties in the market, including the actions of the U.S. central bank, China's demand, and Russia's response to imposed price caps. Eric Nuttall, a partner, and senior portfolio manager at Ninepoint Partners, expects oil prices to hit $100 per barrel in 2023.

Natural Gas Prices are Capped at €180 per Megawatt Hour

On Monday, EU energy ministers agreed to cap natural gas prices at €180 per Megawatt hour, though the European Commission (EU) has warned that the cap could be revoked if "risks outweigh the benefits." This price ceiling follows the recent cap on oil prices at $60 per barrel.

Oil Demand in China Expected to Increase in 2023

S&P's latest forecast predicts that oil demand in China could reach 15.7 million barrels per day in 2023, an increase of 700,000 barrels compared to 2022. According to Yergin, this increase in demand and underinvestment in oil and gas could provide a "big boost" to oil prices and drive them to $121 per barrel. However, the possibility of an economic recession and other factors could also push prices down to $70 per barrel.

Oil Price Forecast for 2023 and Beyond

While there are differing opinions on the short-term trajectory of oil prices, most experts agree that the long-term outlook for oil is uncertain. Some believe that the transition to renewable energy sources and the increasing adoption of electric vehicles will lead to a decline in demand for oil, while others believe that the demand for oil will continue to grow in the coming decades.

One factor that could impact the demand for oil is the rate of economic growth in developing countries, as many emerging economies are heavily reliant on fossil fuels for energy. If these countries experience strong economic growth, it could drive up demand for oil and lead to higher prices.

On the other hand, if the global transition to renewable energy sources accelerates, it could lead to a decrease in demand for oil and lower prices. The uncertain political and economic landscape and technological advancements make it difficult to predict the future of oil prices with certainty.

Impact of Oil Price Fluctuations on the Global Economy

Oil prices significantly impact the global economy, as the cost of oil affects the price of many goods and services. When oil prices are high, it can lead to inflation and slower economic growth, as businesses and consumers must pay more for energy and transportation.

Conversely, low oil prices can stimulate economic growth by providing businesses and consumers with more disposable income, which can lead to increased spending.


The future of oil prices will depend on a variety of factors, including supply and demand, economic growth, and the adoption of renewable energy sources. It is important for businesses and investors to stay informed about these trends and be prepared for potential price fluctuations.