Oil prices still relatively high
Despite being about US$30 below the multi-year peak reached in June, oil prices remain favourable relative to last year’s levels
By Siddhartha Bhattacharya, ATB Economics 1 December 2022 1 min read
Averaging about US$84 per barrel in November, the West Texas Intermediate (WTI) crude oil price benchmark eased slightly from US$87 in October.
Several factors caused prices to jump around in the month, as is the norm. After a bullish start in the first week, prices took a deep dive as higher crude oil inventories in the U.S. and rising COVID-19 cases in China dimmed expectations for global fuel demand. In addition, supply-side concerns exacerbated the situation with reports of major oil-producing nations considering an oil production hike in January 2023.
Despite being about US$30 below the multi-year peak reached in June, oil prices remain favourable relative to last year’s levels. Over the first eleven months of 2022, the WTI benchmark has averaged just over US$96, much higher compared to the annual averages of US$68 in 2021 and only US$39 in 2020.
Looking ahead, markets remain anxious as the European Union is expected to ban most of its crude imports from Russia on December 5 with similar sanctions hitting Russian refined petroleum products on February 5. Meanwhile, OPEC+ members are expected to meet on December 4 to discuss the trajectory of oil supply in the new year.
On the demand side, some factors that continue to play an integral role in pushing prices in either direction include mounting recessionary fears due to tightening monetary policy measures across developed nations as well as the ongoing situation in China (the world’s second largest fuel consumer) as it grapples with COVID cases and protests over its zero-COVID policy.
While continuing to keep a close eye on prices, our current forecast has WTI posting an annual average of just above US$95 in 2022.
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