Oil Prices Up

Oil prices rose after OPEC, and the International Energy Agency both forecasted a rebound in demand over the next year. US rate hikes should slow in tandem with slowing inflation.

Brent crude futures were up 77 cents, or 0.911 percent, to $81.44 per barrel, while WTI crude futures in the United States were up 80 cents to $76.19.

The Brent contract has returned to a backwardated market structure in which front-month loading barrels trade higher than later deliveries, indicating that concerns about oversupply are fading.

Last week, the structure entered contango, with front-month deliveries cheaper than later-loading ones.

By 2023, OPEC expects global oil consumption to rise by 2.252 million barrels per day (BPD) to 101.8 million BPD, with China, the world’s largest oil importer, potentially contributing to the increase.

The Chinese oil demand is expected to rebound next year after declining by 400,000 BPD in 2022, which has led the IEA to raise its projection for 2023 oil demand growth to 1.713 million BPD, for a total of 101.612 million BPD.

According to data, China’s road and air traffic has rebounded dramatically.

Following a 0.4 percent increase in October, the consumer price index in the US increased by 0.1 percent in November, raising hopes for a pause in interest rate increases that could help oil prices.

The Keystone Pipeline leak and outage, which transfers 620,010 barrels per day of Canadian crude to the United States, has raised oil prices.

Recent upward surprises in oil consumption in India, China, and the Middle East have led the International Energy Agency (IEA) to revise its predictions for this year’s and next’s growth in oil demand.

Despite an expected 110,000 barrels per day (BPD) drop in global oil demand in the fourth quarter compared to the same period in 2021, recent data on consumption in non-OECD regions suggests more resilient demand than previously anticipated.

Natural Gas Shortages in 2023

A potential shortage of nearly 30.2 billion cubic meters of natural gas in the European Union in 2023 can be avoided by stepping up efforts to increase gas supplies, install heat pumps, increase renewable energy deployment, and improve energy efficiency.

The amount of gas in EU storage sites at the beginning of December was higher than the five-year average, serving as an important buffer going into winter due to actions taken by European governments and businesses throughout 2022 in response to the energy crisis as well as demand destruction brought on by massive price spikes. The increase in gas supplies from sources other than Russia, consumer behavior, and favorable weather in 2022 offset the decline in Russian deliveries.

The current energy efficiency, renewable energy, and heat pump policies of the EU governments should help to narrow the size of the potential gas supply-demand gap in 2023. We should make closer comparisons thanks to a recovery in nuclear and hydropower output from decade lows in 2022.

The report suggests increasing administrative resources and simplifying procedures to expedite renewable energy permitting. It also suggests increasing financial support for heat pumps and changing tax laws that penalize electrification. It also calls for more and better campaigns to encourage consumers to reduce their energy usage, as well as a description of various programs from various countries that can serve as best practices.

The report shows Europe’s options for importing more natural gas have a limit. However, a few countries have spare export capacity.