The benchmark oil contract averaged USD 99.90/bbl for 2022 and had a strong end to the year, the bank said in research note. On Friday it traded above USD 85/bbl, its highest since 1 December.
Both Brent, as well as the WTI equivalent in the US, did not trade on exchanges on Monday due to public holidays.
“Oil is today absurdly cheap… The energy market will work hard to consume more [of] what is cheap (oil) and less of what is expensive (natural gas and coal),” said Bjarne Schieldrop, chief analyst commodities at SEB.
Crude prices plunged in 2022 amid fears of global recession after hitting a 14-year high of USD 139/bbl in March days after Russia invaded Ukraine.
Earlier today, the head of the International Monetary Fund warned that a third of the global economy would be in recession this year.
Kristalina Georgieva said 2023 would be “tougher” than last year as economies slowed down in the US, EU and China. Economic fluctuations in China and the US are significant for crude prices as the US is the world’s largest producer and consumer of oil, while China is the largest importer and second largest consumer.
Despite “all the macro-economic gloom due to inflation and rising interest rates”, SEB had a positive outlook for oil prices in 2023, said Schieldrop.
He pointed to oil demand recovering in China as it reopens from three years of Covid-19 restrictions and predictions of crude demand rising globally to 1m-2.2m bbl/day in 2023, from the International Energy Agency, Energy Information Administration (EIA) in the US, and the oil producer cartel, Opec , led by Russia and its allies.
“The world has lost a huge amount of fossil supply from Russia due to the war in Ukraine,” said Schieldrop, pointing to supplies of pipeline gas falling to 10% of 2021 levels, and a drop in crude that the EIA predicted would be down by 2m bbl/day this year from pre-Covid levels.
An EU ban on Russian crude imports and a G7 price cap on Russian seaborne crude exports at USD 60/bbl came into effect on 5 December. Yet, Moscow repeatedly said it would not accept a price cap on its oil.