{"id":16732,"date":"2023-07-06T16:15:52","date_gmt":"2023-07-06T13:15:52","guid":{"rendered":"https:\/\/roboforex.com\/blog\/?p=16732"},"modified":"2024-04-15T14:00:29","modified_gmt":"2024-04-15T11:00:29","slug":"review-of-oil-prices-will-the-correction-continue-in-2023","status":"publish","type":"post","link":"https:\/\/roboforex.com\/blog\/2023\/07\/06\/review-of-oil-prices-will-the-correction-continue-in-2023\/","title":{"rendered":"Review of Crude Oil Prices: Will the Correction Continue in 2023?"},"content":{"rendered":"\n

Global oil prices are currently in a downward correction phase, having dropped significantly from their annual highs. At the time of writing, the price of Brent<\/a> crude oil has fallen by more than 15% compared to its annual peak of 89.00 USD, which was recorded on 23 January. The price of WTI crude oil<\/a> has also dropped by approximately 15% compared to the annual maximum value of 83.40 USD, which was reached on 12 April.<\/p>\n\n\n\n

Today we will look at the main factors currently affecting oil price trends and analyse whether the correction will persist this year.<\/p>\n\n\n\n

\"Brent
Brent crude oil chart<\/em><\/figcaption><\/figure>\n\n\n\n
\"WTI
WTI crude oil chart<\/em><\/figcaption><\/figure>\n\n\n\n

<\/span><\/a>Fundamental factors affecting oil prices in 2023<\/span><\/h2>\n\n\n\n

<\/span><\/a>OPEC+ policy<\/span><\/h3>\n\n\n\n

In early April, the Organisation of the Petroleum Exporting Countries OPEC+ unexpectedly decided to cut oil output by 1.6 million barrels per day (b\/d). Amid concerns about a possible global recession, exporters seek to support oil prices by limiting supplies. As a result, oil quotes rose by more than 7%, but the subsequent downward correction offset this increase.<\/p>\n\n\n\n

The OPEC+ alliance of 23 countries led by Saudi Arabia accounts for over 40% of global oil supplies. The 8th OPEC+ International Seminar will be held on 5-6 June with the participation of CEOs of oil companies and energy ministers of the member countries. At the last cartel meeting, the Saudi minister announced further oil production cuts by 1 million b\/d starting from July, of which the market is awaiting confirmation.<\/p>\n\n\n\n

OPEC+ is committed to support oil quotes. At the June meeting, member countries agreed to reduce oil production within the organisation by 1.4 million b\/d to 40.46 million b\/d from 1 January to 31 December 2024. Therefore, public statements at the upcoming seminar and confirmation of the plans to reduce oil output could provide another momentum<\/a> for an increase in oil prices.<\/p>\n\n\n\n

<\/span><\/a>Data from the EIA<\/span><\/h3>\n\n\n\n

The Energy Information Administration (EIA) expects global oil demand to increase by 1.59 million b\/d to 101.01 million b\/d in 2023 and by 1.7 million b\/d to 102.71 million b\/d next year. Global oil output is projected to increase by 1.52 million b\/d to 101.37 million b\/d in 2023 and 1.32 million b\/d to 102.69 million b\/d in 2024. According to EIA estimates, oil production rates in the world will slightly surpass consumption rates by the end of this year, but the market will face a small deficit in 2024.<\/p>\n\n\n\n

<\/span><\/a>Sanctions on Russian oil<\/span><\/h3>\n\n\n\n

Sanctions affecting Russian oil are a significant factor in the oil market. The EU ban on maritime imports of Russian crude oil came into effect in December 2022 with a price ceiling of 60 USD per barrel. An embargo on petroleum products was introduced in February 2023. The EU and partner<\/a> countries have also prohibited maritime services for the delivery of Russian petroleum products and crude oil, except when purchased at the established price or below.<\/p>\n\n\n\n

In response, Russia redirected its trade to Asian and African countries and announced oil production cuts by 0.5 million b\/d since March 2023, which is nearly 0.5% of the total global supply of crude oil. Economists from the European Central Bank say that the embargo on petroleum products from Russia could trigger an increase in the prices of crude oil.<\/p>\n\n\n\n

<\/span><\/a>The slowdown in the US and global economic growth<\/span><\/h3>\n\n\n\n

The hawkish stance of the Federal Reserve System (Fed) and the possibility of further interest rate<\/a> hikes this year might exert additional pressure on the US economy. High inflation<\/a> and slowing economic growth, along with concerns about the stability of the banking sector and the risks of US debt default, are the drivers for the decrease in oil prices.<\/p>\n\n\n\n

According to International Monetary Fund (IMF) forecasts, global economic growth will reach a minimum value of 2.8% this year.  Global inflation will decrease more slowly than expected – to 7% by the end of the year. The war in Ukraine, high inflation, and tightening of monetary policies by central banks in many countries are putting pressure on the global economy, resulting in a decrease in business activity and reduced demand for oil.<\/p>\n\n\n\n

<\/span><\/a>Analytical oil price forecasts for 2023<\/span><\/h2>\n\n\n\n