Oil prices are starting to rise slightly again as Christmas approaches, driven by a slight wave of optimism in the markets. But concerns about global demand in 2023 are still weighing on prices…
On this Christmas Eve, a little light shines on the oil markets. While black gold has had difficult months, prices seem to want to end the year on a slightly positive note. But in a still tense economic and geopolitical context, will this improvement be lasting?
Oil is slowly rising again
This Tuesday, December 24, a barrel of Brent from the North Sea, a European benchmark, gained 0.96% to $73.33. Its American counterpart, WTI, rose 0.97% to $69.91. Modest increases, but welcome after a complicated 2022.
For Matt Britzman, analyst at Hargreaves Lansdown, prices benefit from “slight optimism” before the holidays, in a sluggish market. Investors also seem reassured by rather solid American indicators, giving hope for “a positive end to the year for the world's largest consumer of crude oil”.
The specter of oversupply in 2023
Despite this upward movement, the outlook remains uncertain for next year. Fears of oil supply exceeding demand are resurfacing, limiting the potential for a price rebound. At the beginning of December, OPEC+ decided to extend its production cuts to support prices.
The market is worried about sluggish consumption in 2023, which could have a lasting impact on prices despite the efforts of OPEC+.
An oil analyst
The slowdown in the global economy, particularly in China, raises fears of a decline in demand for black gold next year. And the strength of the dollar, the currency in which barrels are denominated, makes crude oil more expensive for buyers using other currencies, which can also slow down purchases.
Natural gas also on the rise
In the wake of oil, natural gas prices are also starting to rise slightly again. The Dutch TTF futures contract, the European benchmark, gained 1.14% to 46.06 euros per megawatt hour (MWh). According to DNB experts, this increase is linked to uncertainties over a key contract between Russia and Ukraine which expires at the end of December and weighs on flows to Europe.
Despite these upheavals, the gas market remains far from the peaks reached this summer, in the midst of the energy crisis on the Old Continent. European stocks, more than 80% full, allow us to approach winter with a little more serenity, even if caution remains in order.
2023, a pivotal year for the oil market
Beyond short-term factors, sector players will closely monitor the evolution of fundamentals next year. Will the post-Covid recovery be robust enough to boost demand? Will supply, between OPEC+ cuts and capping of Russian crude, be able to adapt? And will geopolitical tensions, from Ukraine to the Middle East, spare the market?
So many questions that will animate the world of black gold in 2023. Investors are hoping for positive signals to sustainably support prices. But in a still unstable economic and geopolitical environment, forecasts remain a perilous exercise. Only one certainty: oil has not finished making headlines.
In the meantime, oil companies are enjoying this bullish New Year's Eve, hoping that Santa Claus will bring brighter prospects for the barrel in his sack. Merry Christmas on the black gold markets!
