Crude oil prices will slide by 24.1% to an average $73.1 a barrel in 2023, the International Monetary Fund has stated in its April 2023 World Economic Outlook Report.
This is from $96.4 in 2022.
The Fund also said oil prices will continue to fall in the coming years to $65.4 in 2026.
“Uncertainty around this price outlook is elevated in part due to the uncertain rebound in China’s growth, as well as the energy transition”, it stated.
Crude oil prices retreated by 15.7% between August 2022 and February 2023 as the slowing global economy weakened demand.
China experienced its first annual decline in oil consumption this century amid repeated shutdowns in response to COVID-19 outbreaks and a faltering real estate market.
Recession fears due to higher-than-expected inflation and tighter monetary policy in many major economies and banking woes sparked concerns about flagging demand.
On the supply side, the report said uncertainty over the effects of Western sanctions on Russian crude oil exports whipsawed expectations about global market balances.
“As of March, Russian crude oil exports had held steady since implementation of the Group of Seven (G7) price cap and ban on crude oil imports on December 5 . Russia rerouted its oil, reportedly sold at a major discount to Brent oil prices, to non-sanctioning countries, primarily India and China”.
Also, the report stated that downside supply risks did not materialize until Russia’s recent announcement of a modest production reduction.
A sizable release of strategic petroleum reserves by Organisation for Economic Co-operation and Development member countries also helped keep oil markets well supplied, in part offsetting underproduction and reduced targets by OPEC+ (Organization of the Petroleum Exporting Countries plus selected nonmember countries).