Will The Oil Rally Last Until 2023? Analysts Are Optimistic That It Can

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This week, oil prices aimed to extend their ongoing rally after a 4% jump last week. 

On Thursday, costs soared for the fourth consecutive day due to diminishing U.S. crude and heating oil supply stocks.

Oil prices skyrocketed after the new governmental data revealed an even bigger-than-anticipated decrease in U.S. crude stockpiles to 5.89 million barrels during the week ending on December 16th. Inventories of distillate stocks such as jet fuel and heating oil also tightened – contrary to what analysts initially predicted.

In light of forecasted weather conditions that may be as frigid as sub-zero temperatures in Texas and record lows for Florida and eastern states, the petroleum stockpile has been dropped. As travel is expected to surge before this holiday season, jet fuel demand is anticipated to rise.

Following sanctions imposed by G7 member nations and the European Union, independent Chinese oil refineries see an uptick in profits as they leverage Moscow’s low-cost crude. 

With a cap of $60 per barrel set by Western powers and restrictions on Russia’s seaborne imports designed to limit their financing efforts for war in Ukraine, Russian oil is being rerouted from the West to Asia at much lower prices.

Commodity bulls are optimistic that the rising trend of oil prices will continue into 2023 as supply decreases and forecasts for a severe winter in Europe and America become more specific. 

Dan Yergin, Vice Chairman of S&P Global, noted conjecture on Tuesday that oil could climb to $90 per barrel by 2023 – though it may be even higher if China lifts all restrictions from the Covid-19 pandemic. Of course, with such volatile markets, there are still significant concerns that must be considered.

Our base case for 2023 is $90 for Brent, but you have to look at other cases. If China gets over Covid, you add a lot of demand to the market,” Yergin said.

By reopening in China, oil prices could skyrocket to $121 per barrel due to underinvestment in the market. Those same prices will likely plunge to around $70 per barrel if an economic recession occurs.

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