By Adedapo Adesanya
S&P Global analysts have predicted that the international crude benchmark, Brent crude, will average $87 per barrel for 2023, down from around a $100 billion average in 2022 as demand weakens.
This is above Nigeria’s $75 per barrel benchmark contained in the 2023 budget.
However, they expect demand weakness to come amid key supply-side vulnerabilities, which under more typical economic conditions, may have caused more persistent triple-digit oil prices.
Earlier this year, Brent shot up to close to $140 per barrel back in March after the outbreak of the Russia-Ukraine war, before it became clear that Russian oil flows would not be immediately impacted as much as many had expected and with the emergence of global inflation risks.
“Furthermore, there are certainly big unknowns on both sides of the market balances ledger: how hard or soft the economic landing will be and how effective the G7 measures will be on Russia.
“Even if there is another spike in prices, the likelihood is that this will only fuel inflation further and ultimately erode demand, bringing prices back down again quicker than usual,” a note from the firm read.
The global oil supply map may be reshaped indefinitely as a result of the fallout from the Russian invasion of Ukraine, with the Group of Seven (G7) nations imposing sanctions on Russia as well as a price cap on Russian crude.
The other key factor on the supply side is the Organisation of the Petroleum Exporting Countries and its allies, OPEC+, with the oil producer group and its Russia-led allies commenting after their meeting on December 4 that they would maintain their production restraint, for now, adopting a wait-and-see approach.
That decision means the 2 million barrels per day in output quota reduction from October levels will remain in place until the fallout from European Union sanctions on Russian crude imports and the G7’s price cap becomes clearer.
OPEC+ has noted that the group’s next full meeting will be in June but has said too that it will undoubtedly act with agility should price or market balances quickly change. It may need to, given that 2023 is unlikely to be any less turbulent than 2022.
