Next
year is set to be another year of uncertainty, with plenty of volatility.
Brent crude futures rose 20 cents to US$83.66 a barrel by
0445 GMT, after settling 1.2% down in the previous session. Brent looked set to
end the year with a 7.6% gain, after jumping 50.2% in 2021. Prices surged in
March to a peak of US$139.13 a barrel, a level not seen since 2008, after
Russia invaded Ukraine, sparking supply and energy security concerns.
US West Intermediate crude (WTI) was traded at US$78.63,
after closing 0.7% lower on Thursday. It is on track to rise 4.5% in 2022,
following a 55% gain last year.
While
an increase in year-end holiday travel and Russia's ban on crude and
oil product sales are supportive of oil prices, declining consumption due to a
deteriorating economic environment next year will offset supply tightness, said
CMC Markets analyst Leon Li.
The global unemployment rate is expected to rise rapidly in
2023, restraining energy demand. So I think oil prices may fall to US$60 next
year," he said.
Oil
prices cooled quickly in the second half this year as central banks across the
world hiked interest rates to fight inflation, boosting the US dollar. That
made dollar-denominated commodities costlier investment for holders of other
currencies.
Also, China's zero-COVID restrictions, which were only eased
in December, squashed oil demand recovery hopes for the world's No. 2 consumer.
While China is expected to slowly recover in 2023, a surge in COVID cases in
the country and global recession concerns are clouding the commodities demand
outlook.
"The recent easing of travel restrictions was expected
to boost oil demand; however, the sharp increase in COVID cases in China has
raised serious concerns over a potential global outbreak," John Driscoll,
director at consultancy JTD Energy Services, said.
In response to China's surge in COVID cases, several countries including
the United States, South Korea and Japan have imposed mandatory COVID tests on
travellers from China.
A health data firm estimated that around 9,000
people in China are probably dying from COVID each day, as infections spread in
the world's most populous nation.
Looking ahead on supplies, western sanctions will push
Russia to divert more crude and refined products exports from Europe to Asia.
In the United States, output growth in top oil-producing
states has slowed despite higher prices. Inflation, supply chain snags and
economic uncertainty have led executives to lower their expectations, the latest
survey by the Federal Reserve Bank of Dallas found.
"This year has been an extraordinary year for commodity
markets with supply risks leading to increased volatility and elevated
prices," ING analyst Ewa Manthey said.
