The Energy Agency expects an increase in oil demand next year (Agence France Presse)
Although low Oil prices In the last months of 2022, it increased significantly compared to its levels earlier this year, however, the expectations of many international investment banks and oil producers tend towards recording prices, a remarkable rise in 2023, to touch $110 a barrel, despite Western sanctions Which aimed to strangle Russia’s resources, as well as pressure from US President Joe Biden’s administration to curtail the “OPEC +” alliance.
Perhaps the investment trends of the American tycoons themselves reinforce the expectations that oil and gas will remain in the spotlight in light of the large gains that are expected to continue despite reports indicating a possible slowdown in global demand, due to fears of a recession in the US and European markets with the continuation of the approach to raising interest rates to counter inflation. high.
While the major American banks have been the preferred investment of the veteran American billionaire Warren Buffett, CEO of Berkshire Hathaway, listed on the New York Stock Exchange for many decades, he is moving towards strengthening his investment position in energy companies to which he has turned his compass over the past two years, according to a report by the website. American Oil Price.
Potential risks
Buffett confirms that he likes to invest in banks, but he points out that the return compared to the potential risks does not appeal to him, as he is concerned that lending activity will be affected by high inflation, which inevitably leads to a decline in investment activity in the United States, while the profits recorded by energy companies lure investors.
Exxon Mobil topped the profits of major oil companies during the 3 months ending last September, as it outperformed the profits of giant European energy companies such as Shell and Total Energy.
And the American company achieved strong profits of $ 19.66 billion during the third quarter of this year, an increase of more than 190% on an annual basis, compared to $ 6.75 billion in the same quarter of 2021. With strong third-quarter profits, Exxon Mobil recorded $ 43 billion in the months During the first nine months of this year, an increase of 19% compared to the same period in 2008, the period in which oil prices traded at a record level of $140 per barrel.
The American company Chevron also achieved the second highest quarterly profit ever, recording $ 11.23 billion in the third quarter, compared to $ 6.11 billion in the same period of 2021, an increase of 84%, as the company benefited from doubling sales of refined products.
According to a recent report by global credit rating agency Moody’s, overall industry earnings will be flat in 2023, although they will come in slightly below recent peaks.
While oil and gas prices have fallen in recent months from the high levels they hit earlier this year, they are still much higher than they were over the past two years, so the enthusiasm will continue in the energy markets.
Strong corporate earnings
David Rosenberg, founder of independent research firm Rosenberg Research & Associates Inc, says strong corporate gains are a major reason why investors are still flocking to oil stocks, even though crude prices have failed to post any significant gains over the past two months.
In the United States, the authorities are moving to rebuild the strategic oil reserves, which raises the demand for crude in the coming months, and China’s pledge to reactivate consumption by easing the restrictions facing Corona, increases expectations of a recovery in demand and raises prices, in addition to the possibility that the West’s move will impose A cap on the price of Russian crude is counterproductive, according to analysts, as Russia is expected to limit supplies to keep prices at high levels.
Rebekah Babin, an energy trader at CIBC Private Wealth Management in the US, told Bloomberg that the market is buying after news of the reopening of the economy in China.
The American Wall Street Journal also quoted Amrita Sen, director of research at Energy Aspects, as saying, “The high demand that China will witness after lifting the measures may be massive, and may lead to fluctuations in demand, as well as prices, to range between $95 and $130.” per barrel.
In addition, oil flows from Russia have proven resilient and strong so far, as the price ceiling imposed by the Group of Seven and member states of the European Union did not result in any significant price disturbances, as reports indicated a decline in Russian crude exports outside the CIS (component of from 12 former Soviet republics) earlier this month.
The Russian daily Kommersant reported, yesterday, Wednesday, quoting unidentified informed sources, that Russian oil exports declined by 11% between the beginning and the 20th of December, compared to the previous month, to reach about 560,000 tons per day (4.1 million barrels).
Possible increase from China
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said in its 2023 outlook issued earlier this month that oil demand will grow by 2.25 million barrels per day over the next year to reach 101.8 million barrels per day, with a possible increase from China, which is larger. importer of oil in the world.
The International Energy Agency, a week ago, raised its estimates for oil demand next year to an increase of 1.7 million barrels per day to 101.6 million barrels per day. These estimates came on the basis of a prediction that Chinese oil demand will recover next year after a contraction of 400,000 barrels per day in 2022.
In this context, the American bank “Goldman Sachs” expected, a few weeks ago, that oil prices would rise to the level of $115 per barrel at the beginning of next year, with the entry into force of the European Union’s decision to ban the import of Russian oil. The decision of the Group of Seven industrialized countries, the European Union and Australia, to set a ceiling for the price of Russian oil at $60 a barrel, came into effect on December 5th.
The agreement allows the shipment of Russian oil to third-party countries (not participating in the sanctions coalition against Russia) using G7 and European Union tankers and providing them with insurance services, only if the shipment is purchased at the agreed price or less than it.
Setting a ceiling on Russian oil prices aims to reduce Russia’s revenues, while ensuring that Moscow continues to supply the global market with crude to maintain market balance as well.
However, there are different views, as Lin Boqiang, director of the Chinese Center for Energy Economics Research at Xiamen University, said in statements to the Chinese newspaper Global Times, earlier this month, that instead of envisioning a calming effect on energy prices by placing a ceiling on Russian oil, it should European countries should prepare for more expensive energy bills, he said, adding that “Moscow is unlikely to succumb to the mandate at a reduced rate in the foreseeable future.”
Increasing Russian exports to Asia
Russia is the world’s second largest exporter of crude oil, after Saudi Arabia, with an 11% share of the international market. On November 14, Bloomberg Agency reported that the pace of Russia’s exports of crude oil to Asia has increased in recent months, as two-thirds of the crude oil transported through tankers in Russian ports is now destined for Asia, while the percentage was less than 50% before. The outbreak of the Russian war in Ukraine. Reports specialized in tracking oil tanker deals also indicated that Russia has formed its own fleet of tankers to operate it and provide insurance for it as well.
Bank of America said that the price of benchmark Brent crude may rise rapidly to exceed the level of $90 a barrel, while the Swiss bank “UBS” expected oil prices to exceed $100 a barrel next year, with Russia reducing its crude production and recovering demand from oil prices. China side.
While the expectations of the American Morgan Stanley Bank were higher than its predecessors, as it indicated the possibility of reaching about $ 110 a barrel by mid-2023, supported by high demand and the continued scarcity of crude supply.