Crude oil price remains below the once steady support zone of $85 per barrel as a rise in COVID-19 cases in China lower mobility. Even so, most analysts are still optimistic that reopening of the second-largest economy will boost the commodity in Q1’23.
Crude oil price forecast for 2023
As has been the case in recent weeks, China’s reopening will remain a major driver for crude oil price in the initial months of 2023. The importance of this market is founded on the fact that the country is the leading importer of crude oil globally and the second largest consumer of the product after the US.
On the one hand, a rise in COVID-19 infections and subsequent decline in traffic has continued to weigh on the commodity. Notably, the surge in coronavirus cases in the Asian country coincides with the surprise easing of its zero-covid policy. With the Chinese New Year holiday in the horizon, experts worn that the infections may gather momentum over the winter season.
Indeed, this factor is largely the reason why crude oil price has failed to gather enough bullish momentum to retest the once steady support zone of $85.00. Even so, most analysts remain optimistic that China’s oil demand will improve as 2023 unfolds.
For instance, Citigroup Inc. expects the country’s crude oil demand to surge by 700 bpd once it reopens. Besides, the chart below shows 2023 crude oil price predictions by key strategies as compiled by Bloomberg.
| Brent oil (benchmark for global oil) | WTI (benchmark for US oil) | |
| Citigroup | $80 | $75 |
| BoA | $100 | $94 |
| Goldman Sachs | $98 | $92 |
| JP Morgan | $96 | $90 |
| Morgan Stanley | $103.7 | $101.25 |
BoA predicts that Brent crude oil price may rally even further to $110 per barrel in Q2’23. While substantiating this forecast, the bank argues that the downside risks are limited while the upside risks include a faster-than-expected reopening of the Chinese economy. The probably tapering of Fed’s interest rate hikes in Q1’23 and EU’s embargo on Russian oil also support its bullish thesis.
On its part, Goldman Sachs is of the opinion that “without sufficient capex to create spare supply capacity, commodities will remain stuck in a state of long run shortages, with higher and more volatile prices”.
