Barclays cut its 2023 oil price forecasts on Wednesday, due in part to more resilient output from Russia than expected, and said the market could flip into a deficit in the second half of the year due to growing demand in China.
The bank cut its average forecasts for the Brent and West Texas Intermediate (WTI) benchmarks by $6 per barrel (/b) and $7/b, respectively, to $92/b and $87/b.
It also forecast Brent would average $97/b next year and WTI $92/b.
The market could flip into a deficit of 500,000 barrels per day (bpd) in the second half of this year as China’s reopening from pandemic restrictions “matures” and as supply growth from outside the OPEC+ producer group slows, the analysts added.
China’s oil demand could increase by 500,000 to 600,000 bpd in 2023, Haitham Al Ghais, the secretary general of the Organization of the Petroleum Exporting Countries (OPEC), said on Tuesday at the CERAWEEK conference, with global oil demand seen rising by 2.3 million bpd in 2023.
Oil gains as Russian output cuts offset rising U.S. inventories
Barclays, meanwhile, revised its 2023 demand estimate 150,000 bpd higher due in part to a somewhat improved growth outlook for the United States and Europe. It sees a 900,000 bpd increase in Chinese demand this year.
The Group of Seven economies, the European Union and Australia agreed a price cap on Russian oil late last year, aiming to deprive Moscow of funds for its war in Ukraine.
Barclays said the risk of a deceleration in broader economic activity remained due to flat industrial activity and continued tightening of monetary conditions.
Brent crude futures were up 0.1% to $83.40 per barrel at 1103 GMT, while U.S WTI crude futures were down 0.1% to $77.49 a barrel.