Global | Oil in 2023: tight market and prices still high

We will see a very tight market throughout 2023, despite what is likely to be a significant economic slowdown due to various shocks, following the trend seen in recent years.

Key points

• Key points:
• Demand over the coming months will be largely influenced by a sizable slowdown in activity across the world’s major economies, with an expected decline in their oil consumption, especially towards the middle of the year.
• However, the expected normalization of economic activity in China, now that it has announced the end of its “zero-COVID” policy, will compensate to a large extent for the lower demand for oil from developed economies, although this offsetting will be more noticeable in the second half of 2023.
• The sanctions will have a stronger effect on the supply side: price ceilings and bans on Russian oil purchases, not only because of the inability to redirect some of the supply, but also because of the Russian government’s own decision to reduce its supply and the traditionally lethargic negotiation process with Iran, with no agreement reached so far.
• Against this backdrop, the growth in demand seen in previous years coupled with a more subdued supply side has led to a tight oil market, which will be slightly in deficit as we move through the latter half of the year.

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