Oil set for slight gains to end a turbulent 2022

Singapore — Oil prices edged up on Friday and were on track to post their second straight annual gains, albeit modest, in a stormy year marked by tight supplies due to the Ukraine war, a strong dollar and weakening demand from the world’s top crude importer, China.

Brent crude futures rose $0,20, or 0.2%, to $83.66 a barrel by 0445 GMT, after settling 1.2% down in the previous session.

Brent looked set to end the year with a 7.6% gain, after jumping 50.2% in 2021. Prices surged in March to a peak of $139.13 a barrel, a level not seen since 2008, after Russia invaded Ukraine, sparking supply and energy security concerns.

US West Intermediate crude was at $78.63, up $0.23, or 0.3%, after closing 0.7% lower on Thursday. It is on track to rise 4.5% in 2022, following a 55% gain in 2021.

While an increase in year-end holiday travel and Russia’s ban on crude and oil product sales are supportive of oil prices, declining consumption due to a deteriorating economic environment in 2023 will offset supply tightness, said CMC Markets analyst Leon Li.

“The global unemployment rate is expected to rise rapidly in 2023, restraining energy demand. So I think oil prices may fall to $60 next year,” he said.

Oil prices cooled quickly in the second half this year as central banks across the world hiked interest rates to fight inflation, boosting the US dollar. That made dollar-denominated commodities a more costly investment for holders of other currencies.

Also, China’s zero-Covid restrictions, which were only eased in December, quashed oil demand recovery hopes for the world’s number two consumer. While China is expected to slowly recover in 2023, a surge in Covid cases in the country and global recession concerns are clouding the commodities demand outlook.