— There is a lot that speaks for it. If it gets cheaper, it’s probably because the economy is going terribly badly, so then it’s hardly anything to cheer about, says Samuel Ciszuk, energy analyst at ELS Analysis.
China’s heavy-handed handling of the pandemic with major shutdowns is dampening demand for crude oil in the world’s largest importer. This, combined with a weaker economy in Europe, is pushing the price of crude oil down so that it is now back at the same level as at the beginning of the year.
The same applies to the price at the pump for Swedish petrol consumers – the recommended target price for private individuals is now at roughly the same level as in February, just over SEK 19 per litre.
Strong counter forces
But there are also strong counter-forces which suggest that the price may soon begin to rise again, emphasizes Samuel Ciszuk.
As soon as China starts to open up more, demand will bounce up – and thus also the price, he predicts. He also believes that the EU’s extended sanctions measures against Russia will have a major impact on prices.
— Most analysts believe that this will drive prices up. At the end of January, there will also be a total ban for Europe to trade refined products from Russia and then the remaining imports will be stopped. Then there will be a shortage.
The Russian imports must then be replaced with refined products from markets further away.
— There are longer routes and you have to fight in other local markets to get them to export. Tankers become a tight sector when much longer distances are to be transported.
“Slightly lower prices”
Christian Kopfer, commodity analyst at Handelsbanken, still believes that we may see slightly lower prices in 2023 due to the declining economy – but he has a hunch.
“It is reasonable to expect that we can get slightly lower prices in 2023. But then there is a joker in this game and that is the big cartel Opec,” he says.
The question is how low the price of crude oil needs to be for the oil cartel to decide to reduce production. Christian Kopfer believes we can start approaching that level now. Opec has its next meeting on Sunday.
— Should it turn out that they decide now or at some other date in the near future on a sharp reduction in production, the price of oil will rise again. They have so much power over pricing.
In the longer term, humanity’s increasing thirst for oil also speaks for even higher prices, he believes.
— The world will consume more oil than it has ever done before, while investing less in oil production. It’s not like that right now. It went down quite significantly in connection with the pandemic and that drop has not yet recovered, but if you look at the underlying trend, maybe in 2024 we will break new consumption records.