Barclays Bank cut its 2023 oil price forecast due to more resilient than expected Russian production. The average forecasts for the Brent and West Texas Intermediate (WTI) benchmarks were lowered by $6/b and $7/b, respectively, to $92/b and $87/b. The market could swing to a deficit of 500,000 barrels per day (bpd) in the second half of this year, analysts say.
Reasons for the drop in forecasts
Russian oil production proved more resilient than expected, prompting Barclays to cut its price forecasts for Brent and WTI benchmarks. Indeed, the Group of Seven economies, the European Union and Australia agreed to a cap on Russian oil prices late last year, aimed at starving Moscow of funds for its war in Ukraine. This decision helped limit the impact of economic sanctions on the country.
Barclays also estimates that China’s oil demand could increase by 500,000 to 600,000 bpd in 2023, while global oil demand is expected to increase by 2.3 million bpd in 2023. The bank raised its 2023 demand estimate by 150,000 b/d, in part due to an improved growth outlook in the U.S. and Europe.
Outlook for the oil market
Barclays estimates that the market could swing to a deficit of 500,000 bpd in the second half of this year due to growing demand in China, but also due to reduced supply outside the OPEC+ group of producers. Brent crude futures were up 0.1 percent at $83.40 a barrel at 11:03 GMT, while WTI futures were down 0.1 percent at $77.49 a barrel.
Barclays’ oil price forecast for 2023 has been revised downward, mainly due to more resilient than expected Russian oil production. Growing demand in China, however, could lead to a deficit in the oil market in the second half of this year. The outlook for the oil market remains uncertain due to stagnant industrial activity and continued tightening of monetary conditions.
