Price risks are titled to the upside in late 2022 - quarterly average prices for crude oil benchmarks, 2021 - 2023

Our Brent crude annual average oil price forecast remains at US$ 105 for 2022 and US$ 95 for 2023

Despite weakening global growth, MNCs should continue to assume a historically high oil price environment through 2023. Firms should likewise expect refined petroleum products, such as diesel, gasoline, and jet fuel, to continue selling at a premium. Relatively high prices will continue to be a boon for oil producers and exporters, supporting growth and tax revenues in those markets through next year. Firms should also become accustomed to an environment of continued high oil price volatility and organize buying and financing arrangements that mitigate price swings.


After surging past US$ 125/barrel in the weeks after Russia’s invasion of Ukraine, the price of Brent crude oil has been on a firm downward trend since June, when markets began pricing in expectations of weaker oil demand due to a global recession and the continuance of China’s Zero-COVID policy. Although prices have dropped, a high degree of uncertainty about the supply and demand outlook has made prices exceptionally volatile. Brent crude prices have swung between US$ 90 and US$ 102 in the last month, and currently sit in the high US$ 90s range.

Our View

Our annual average Brent crude oil price forecast is US$ 105 for 2022 and US$ 95 for 2023. Near-term price risks are tilted to the upside due to the likely impacts of OPEC production cuts, the potential fallout from the G7’s imposition of a price cap on Russian oil, the end of releases from US strategic petroleum reserves in October, and energy shortages in Europe. However, weakening global growth and the persistence of China’s Zero-COVID strategy will exert continued downward price pressure through the end of next year and help keep average prices below US$ 100.

  • OPEC and US production: OPEC’s priority remains to “balance” the market at moderately high prices, and recent statements and decisions indicate its preferred price range is in the low US$ 100s, which suggests the bloc will pursue more output cuts in the very near term. US production continues to recover but will remain below pre-pandemic production until early/mid 2023.
  • Russia’s oil production: Russian oil production will continue to face downward pressure, as sanctions disrupt the Russian energy sector’s operations, financing, and exports. We expect Russian crude oil production to fall from 11.3 million bpd in Q1 2022 to 9.3 million bpd in Q4 2023. Russian production fell to a preliminary estimate of 10.56 million bpd in August, marking the beginning of a steeper downward trend that is set to accelerate in the coming months.
  • Oil price cap: The G7 recently announced its intent to impose a price cap on Russian oil, which could prompt Russia to retaliate by dropping production or exports in order to purposely limit global supply. Our forecasts account for this possibility, but retaliation by Russia would likely not significantly run ahead of the expected drop in production under existing sanctions, as Russia faces technical barriers to halting production. Still, these developments point to continued potential for sudden disruptions to global oil supply.
  • China’s lockdowns: We expect China to continue its Zero-COVD strategy through at least mid/late 2023, which will exert significant downward pressure on oil prices, as China accounts for 13% of global oil consumption. However, “dynamic” lockdowns mean that oil prices will remain volatile, dropping when major cities go into lockdown and rising again when they reopen. The timing and degree of these fluctuations are unpredictable.
  • Europe’s energy crisis: Shortages of natural gas in Europe are already prompting switches to other fuel sources, particularly diesel and coal. Europe’s energy crisis will also contribute to upward pressure on natural gas prices in other regions, particularly in China and developed Asia. Fuel switching to petroleum sources will exert upward pressure on oil prices.
  • Runoff on SPR releases: One factor exerting downward pressure on oil prices in recent months is ongoing releases from US strategic petroleum reserves (SPR), as the Biden administration is under pressure to keep retail gasoline prices contained ahead of the November midterm election. US SPR releases are scheduled to stop at the end of October. Although the timeline could be extended, SPR levels are falling rapidly, and the Biden administration may opt to hold on further releases to shore up against future market disruption.
  • Tight refining capacity: Although not reflected in our price forecasts for crude oil, tight global refining capacity—stemming from both the war in Ukraine and a legacy of underinvestment—will ensure that prices for distillates and refined petroleum products will remain high and sell at a premium to crude throughout 2023. This will keep prices for diesel, jet fuel, and retail gasoline exceptionally high next year.

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