Crude oil prices end 2022 higher despite global demand concerns

January 2, 2023

Oil prices ended the week higher on Friday, rallying on the last trading of the year, despite an unexpected rise in US crude stocks, recession fears and demand concerns owing to a resurgence of Covid-19 infections in the world’s top crude importer China.

Brent, the benchmark for two thirds of the world’s oil, settled 2.94 per cent higher at $85.91 a barrel at the close of trading on Friday, while West Texas Intermediate, the gauge that tracks US crude, gained 2.37 per cent to $80.26 a barrel.

Despite the price volatility this year, which was exacerbated by the Ukraine war that disrupted global supplies, this was the second annual gain for the oil market.

Brent gained about 10 per cent this year, after jumping 50 percent in 2021, while WTI ended up about 7 percent in 2022, following a 55 per cent surge last year.

Brent soared to a 14-year high of close to $140 a barrel in March after Russia’s invasion of Ukraine, but sluggish economic growth in China and the strong possibility of a recession in several economies weighed on the market.

“Going into 2023, the risks are arguably tilted to the upside, although that has been the narrative for much of the year,” said Craig Erlam, a senior market analyst at Oanda.

“While producers have finally caught up with post-pandemic demand, other risks remain next year, notably Russian output amid the new price cap and its threats to cut output and not supply any countries abiding by it. That isn’t a problem now but if prices do start rising, that could accelerate the move quickly,” said Erlam.

A surprise increase in US crude stocks weighed on prices at the start of trading on Friday. US commercial oil inventories increased by about 700,000 barrels in the week ending on December 23, data from the US Energy Information Administration(EIA) showed.

Meanwhile, analysts were expecting crude stockpiles to fall by 700,000 barrels to 1.5 million barrels.

The indicator, which shows the level of oil and product stored, gives an overview of US petroleum demand. If the increase in crude stocks is more than expected, it implies weaker demand and is bearish for crude prices.

On Thursday, TC Energy said it completed a controlled restart of its Keystone crude pipeline to Cushing, Oklahoma, returning the vital oil link to service after a three-week shutdown.

“The Keystone Pipeline System is now operational to all delivery points. As always, we continue to monitor the system 24/7 as we deliver the energy customers and North Americans rely on,” the Canadian pipeline operator said in a statement. The pipeline, which can transport 622,000 barrels per day of oil, was closed after more than 14,000 barrels of crude oil spilled into a creek in Kansas.

Analysts and investment banks expect prices to rebound to about $100 next year as China reopens its economy and sanctions on Russian crude cause supply disruptions.


oil and gas

oil and gas

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