Global | Oil: the pulse between demand and supply

Summary

Having passed the halfway point of the year, it is important to reflect on the behavior of the oil market, and to take note of the lessons learned for the second half of 2023.

Key points

• Key points:
• The year 2022 closed with an expected moderation in demand due to the expected slowdown in the global economy. This sentiment was cut short, temporarily, by China's announcement of the end of its zero-tolerance policy on COVID and the resilience of activity in several economies around the world.
• However, continued signs of weakening global activity, especially in China in recent months, have led to expectations of a moderation in the demand for oil, which has dominated oil price behavior.
• The supply side has also faced a changing scenario. At the close of 2022, the expectation of reduced output from Russia, due to restrictions on purchases from Europe and the setting of a price ceiling, set the tone for market sentiment.
• However, the supply reduction from this country has been limited during 2023, as it has avoided the sanctions through markets such as China and India.
• At BBVA Research we expect the price of Brent crude oil to settle at 83 dollars per barrel in the second half of the year. For the full year, it would be around 82, well below the 99 of 2022, but still at a good level for producers.

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