4: 2023 OUTLOOK

A. Crude Oil and Natural Gas Prices

There is anticipation regarding crude oil and natural gas prices predictions in 2023. The global brent crude oil price will rise from an average of $81 per barrel in December 2022 to an average of $83 per barrel in the first quarter of 2023. This increase follows the upcoming EU ban on seaborne imports of petroleum products from Russia. The brent price will stay relatively flat through the second quarter of 2023, stated by the EIA.

Surprise OPEC+ supply cuts announced on April 2, 2023 have relatively changed the forcastes. The average Brent crude oil price forecast rose to reach $85 per barrel in 2023. The higher price forecast reflects an expectation for less global production in 2023 and a relatively unchanged global oil consumption, according to the EIA.

Natural gas prices will decline in the second quarter of 2023 and then stay relatively flat throughout the rest of the year. This comes as a result of winter weather subsiding, reducing domestic consumption and dry natural gas production continuing to rise, as well as, US LNG exports remaining flat once Freeport LNG comes back online. As inventories remain above the five-years average in 2023, natural gas prices average less than $3.00 mmbtu for 2023, according to the EIA.

B. Global Institutions Expectations for Demand, Supply

The oil and gas market has been the focus of attention by many institutions worldwide, especially after the Russia-Ukraine war crisis. For 2023, major global institutions set their expectations and forecasts for the demand and supply of the market.

» The EIA

The EIA expects that global petroleum production will increase by 1% (1.1 mmbbl/d) from 2022 to 2023. The US and OPEC account for most of the increase in global production, offsetting declines in Russia. Russia’s petroleum production will fall from 10.9 mmbbl/d in 2022 to 9.5 mmbbl/d in 2023 as a result of sanctions related to Russia’s full-scale invasion of Ukraine. US production will grow by 5%, and OPEC liquid fuels production (which includes crude oil) will increase by 0.5% in 2023.

US natural gas production is to increase by about 2% in 2023, averaging between 100 bcf/d and 101 bcf/d for the year. Natural gas consumption to decline in the electric power sector as more renewable electric-generating capacity comes online.

» The IEA

According to the IEA Oil Market Report (OMR) published in March 2023, world oil demand growth is set to accelerate sharply over 2023, from 710,000 bbl/d in the first quarter to 2.6 mmbbl/d in the fourth one. Global oil demand is forecast to reach a record 102 mmbbl/d.

For the world oil supply, it is expected that the non-OPEC+ states will drive global output growth of 1.6 mmbbl/d in 2023, enough to meet demand in H1 of 2023 but falling short in H2 when seasonal trends and China’s recovery are set to boost demand to record levels.

» OPEC

OPEC expects a solid global oil demand growth in 2023, coming from the relation of China’s zero-COVID policies, as the country's oil use pushed into a contraction for the first time in years. Chinese demand is to grow by 590,000 bbl/d in 2023. World oil demand will rise by 2.25 mmbbl/d or about 2.3% in 2023.

» The WB

OPEC+ output will remain subject to quotes in 2023. According to the OPEC meeting on 5 October 2022, members agreed to cut their production target by 2 mmbbl/d starting in November 2022 through the end of 2023.

Around half of global oil production growth in 2023 is expected to come from the US, where total production is forecast to increase by about 1 mmbbl/d. About half of the growth in oil consumption in 2023 is expected to be accounted for by China, as the country gradually reduces pandemic restrictions.