LONDON: Oil may resume its rally in 2023 as Chinese demand recovers after Covid curbs were scrapped and lack of investment limits growth in supply, Opec country officials told Reuters, with a growing number seeing a possible return to $100 a barrel.

In 2022, oil soared above $100 for the first time since 2014 as demand recovered from Covid-19 lockdowns in much of the world and Russia’s invasion of Ukraine added to supply concerns. But Brent crude ended the year close to $86 on fears of global recession.

A move back above $100 for a prolonged period would earn more revenue for Opec members, whose economies mostly depend on oil income, and be a setback for industrialised economies trying to control inflation and interest rates.

To support the market, the Organisation of the Petroleum Exporting Countries and allies including Russia, known as Opec+, in October agreed to cut production by 2 million barrels per day, about 2 per cent of world demand.

After 2022’s volatility, which sent Brent crude close to its all-time high of $147 soon after the Ukraine war began, so far in 2023 Brent is up slightly at just over $86, helped by Russia’s plan to cut output in March.

Opec and Opec+ do not publish oil price forecasts and do not have a price target. Officials and ministers from Opec and Opec+, are often reluctant to discuss the direction of prices on the record.

In rare public comments on Feb. 8, Iran’s national representative to Opec, Afshin Javan, said oil may rebound to around $100 in the second half of the year, adding that Opec+ was likely to keep its current output policy at its next meeting.

Reuters spoke privately to five more Opec country officials about the prospect of $100 oil. Of these, three saw oil as more likely to rally in 2023 than decline, with two predicting prices heading back to $100.

“It should be said that the shadow of the energy crisis will continue to dominate the world and the general trend of global oil prices will increase,” said one of the Opec sources.

“In my opinion, the return of Brent crude to above $100 at some time in 2023 is not unexpected.” Consensus in the industry currently is for lower prices in 2022. A Reuters survey of 30 economists and analysts forecast Brent would average $89.37 a barrel in 2023, down from $99 in 2022. Goldman Sachs lowered its 2023 Brent forecast to $92.

Published in Dawn, February 12th, 2023