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Fitch Solutions has reiterated its oil price forecast for this year at $95 per barrel of Brent crude, citing China’s quicker-than-expected reversal of zero-Covid policies and slow production growth.
“On the demand side, prospects for growth have improved, following the earlier-than-expected easing of Covid-19 containment measures in Mainland China,” the ratings agency said, as quoted by The Edge.
“On the supply side, uncertainties around Russia continue to cloud the outlook, but slowing production growth in the US, further delays to the Iranian nuclear deal and continued production restraint by OPEC+ will combine to significantly decrease supply growth this year,” Fitch Solutions added.
That same set of factors has been cited by other bullish forecasters, too with some of them expecting Brent to top $100 per barrel again this year. Goldman Sachs, for instance, sees Brent hitting $105 per barrel in late 2023 on the back of strong demand growth that would push the oil market into deficit in the second half of the year.
Morgan Stanley also sees a tighter oil market in the second half of the year, which could push Brent crude to $110 per barrel by the end of the year.
While China’s rebound is already underway and expectations of stronger oil imports have a sound foundation in Beijing’s recently issued import quotas, the situation with Russian oil production is less clear.
Many analysts last year expected Western sanctions to affect that dramatically and push oil prices much higher. However, the redirection of exports rather than a production cut ensured a relatively modest impact of the sanctions on global oil supply and, consequently, prices.
One other factor that played a part in Fitch’s bullish outlook for oil prices this year was the changed sentiment about the global economy, with expectations now for a milder-than-forecast slowdown.
“Despite ongoing headwinds in the form of monetary and fiscal policy tightening, recent data releases suggest that several large economies are holding up better than expected,” the ratings agency said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.