By Adedapo Adesanya
The oil market ended the turbulent 2022 positively amid tight supplies following the war in Ukraine, weakening demand from the world’s top crude importer China and fears over the global economy.
Brent crude on Friday rose by $2.45 or 2.94 per cent to $85.91 a barrel, with the US West Texas Intermediate (WTI) crude gaining 91 cents or 1.2 per cent to $80.44 per barrel.
For the year, Brent gained 8 per cent, after jumping 50 per cent in 2021, while US crude was set to rise about 5 per cent following last year’s gain of 55 per cent. Both benchmarks fell in 2020 as the COVID-19 pandemic slashed fuel demand.
The year started on a very strong foot as prices surged in March, with international benchmark Brent reaching $139.13 a barrel, the highest price since 2008, after Russia’s invasion of Ukraine affected crude flows.
Oil, however, declined in the second half of 2022, largely on rising interest rates to fight inflation, which boosted the US Dollar that made dollar-denominated commodities like crude a more costly investment for holders of other currencies.
Market analysts said while an increase in year-end holiday travel and Russia’s ban on crude and oil product sales supported crude, supply tightness will be offset by declining fuel consumption due to a deteriorating economic environment next year.
They also warned that investors in 2023 will likely continue to take a cautious approach, with rate increases and recession concerns dampening their outlooks.
China’s zero-COVID restrictions, which were eased only this month, also squashed demand recovery hopes. The world’s top oil importer and second-biggest consumer in 2022 posted its first drop in oil demand for years.
Although China is expected to recover in 2023, a recent surge in COVID-19 cases has dimmed hopes of an immediate boost in barrel buying. Countries like the US, Japan, and India, among others, have also placed renewed restrictions on travel from the country.
The Keystone pipeline that was shut down earlier this month after a spill has returned to operation TC Energy, its operator, said. The pipeline, which is a vital conduit for Canadian oil to the US, was shut down after a leak was reported in Nebraska into a creek. It took several days to contain the leak, and then the company proceeded to repair the damaged piece of infrastructure.
An unexpected build in US crude oil inventories also served to weigh on prices, even though it was a modest one, at 700,000 barrels.
As a whole, the oil price outlook remains highly uncertain, according to analysts.
Modupe Gbadeyanka