Oil prices will only gain slightly in 2023, hitting $89.37 on the average, thanks to a worsening global economic outlook as well as the latest COVID-19 outbreak in China, which will take a hit on oil demand.
A survey of 30 economists and analysts predicted for Reuters that Brent crude will average $89.37 a barrel in 2023, just 4 per cent higher than current price of $85.91 per barrel and 4.6 per cent lower than the $93.65 consensus in a November survey.
If the forecast remains spot on this year, it means that Nigeria may be able to save about $15 per barrel in its currently depleted Excess Crude Account (ECA) despite high oil prices.
The National Assembly recently passed a N21.8 trillion budget, pegging Nigeria’s crude oil benchmark at $75 per barrel from the previous $70 per barrel while production for 2023 was put at 1.69 million barrels per day.
Although production data for December 2022, had yet to be released, in November, Nigeria was only able to produce roughly 1.2 million bpd.
Brent, Nigeria’s oil benchmark , averaged $99 per barrel in 2022, according to the report. Meanwhile, the experts have predicted that United States crude will average $84.84 per barrel in 2023, lower than the previous month’s $87.80 consensus.
“We expect the world to slip into recession in early 2023 as the effects of high inflation and rising interest rates are felt,” Bradley Saunders, Assistant Economist at Capital Economics, told Reuters. Another oil bear, Credit Suisse, said the selloff is not yet over.
“The market remains well below its 55-Day Moving Average and 200DMA at 89.01 and 100.67, and with medium-term momentum declining and global growth concerns looming, we think further weakness is likely to follow,” it added.
The Reuters poll contradicts a string of bullish analysis on oil in the past couple of weeks, including a $90 per barrel prediction from Bank of America and a $100 per barrel prediction from Ninepoint Partners LP.
Oil markets have gone back and forth with recession fears in the past few months. While inflationary pressures seem to have eased, leading to optimism for lower rate hikes by the Fed in the future, concerns linger that rates could remain high for the first half of this year.
Nigeria has not been able to reap the full value of high global oil prices due to its failure to meet the Organisation of Petroleum Exporting Countries (OPEC) quota. The country blames massive oil theft for the challenge.
Emmanuel Addeh
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