Expect lower volatility in Oil prices now: Vandana Hari - Founder & CEO of Vanda Insight

12 Jan 2023 , 11:36 AM

i. Global Oil demand is expected to exceed pre-COVID levels in CY23; OPEC, IEA and EIA, regardless of looming fears of recession, forecast growth in Oil demand. Rebound in Chinese economy will remain a major factor in the said growth.

ii. In H1CY23, due to inflation, monetary tightening, etc., there is risk of global slowdown, which may lead to softer prices relative to CY22. However, cooling inflation combined with Fed pivot could push Crude prices higher in H2CY23.

iii. Russia is finding it a challenge to find new homes for its 1mbpd Crude Oil since December EU ban on the imports. China and India collectively have already absorbed up to 1.5mbpd more, since February 2022.

iv. Although the spike in GRMS has fizzled out, global refining markets are tight with only 2mbpd new capacity addition expected by CY23. Vandana expects this to be the last major investment in greenfield Refinery projects, which may present an overhang on actual product supplies — and to that extent — invite volatility in GRMs.

v. Against this backdrop, in the near term, Oil prices may remain range-bound (US$75-85/bbl) and US$15-20/bbl less than CY22 price averages. However, lack of investments, spare capacities and geopolitical issues could lead to higher prices as soon as growth momentum is back.