Fuel Prices: Buckle up, 2023 is likely to be a bumpy ride!Oil prices jumped on Thursday but, for the first week of the New Year, are heading for an overall weekly loss. Demand concerns are continuing to weigh on the market amid signs of a global economic slowdown.
“Oil is trying to rally but demand concerns are keeping the gains small,” said Edward Moya, Senior Market Analyst at Oanda.
China, the world’s top importer of oil, is reopening its economy after abandoning its zero-Covid policy, designed to curb the spread of the coronavirus pandemic, last month. This has helped oil prices to surge. However, infections continued to rise in the world’s second-largest economy, with many countries asking Chinese travellers to take a Covid test before leaving the country.
In October, the International Monetary Fund cut its growth forecast for the world economy in 2023 amid the Ukraine conflict, broadening inflation pressures, and a slowdown in China. The latest data from the U.S.-based Energy Information Administration is also weighing on oil prices. The data showed that 7 million barrels had been added to commercial storage for the week that ended on December 30th. Despite this, gasoline inventories fell by about 300,000 barrels, while distillate inventories including diesel and heating oil dropped by 1.4 million barrels.
“The EIA crude oil inventory report was mixed but one of the big takeaways is that it showed demand is falling off a cliff,” Mr Moya said.
With so much uncertainty, the outlook for oil remains unpredictable. The OPEC+ supergroup of Saudi Arabia, Russia, and other countries is already cutting production by 2 million barrels per day based on demand concerns.
On Friday, the U.S.-based energy company Tellurian said that, despite the current downward pressure, if oil demand starts to decline, OPEC has stated they can “meet any time if prices aren’t going the way they want”.
OPEC and its allies will remain “proactive” as global oil markets face uncertainty, Saudi Arabia's Energy Minister said last month. The group “could meet before June 4, 2023, to consider further output cuts, which may be sooner rather than later.”
“In face of a wide range of uncertainties, OPEC+ has no choice but to remain proactive and pre-emptive, and this is not an easy task, especially since the market has the tendency to overreact to news in both directions,” Prince Abdulaziz bin Salman said in an interview with official news agency SPA.
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