- Crude oil prices: The spot price of Brent crude oil averaged $91 per barrel (b) in November. Although the average November Brent price was slightly lower than in October, daily spot prices reached almost $100/b on November 7, before ending the month at $86/b. The price declines were largely the result of market concerns about global economic growth, as well as COVID-related lockdowns in China that have reduced China’s oil demand. Brent crude oil spot prices are on pace to average $101/b in 2022.
According to the U.S. Energy Information Administration (EIA) website article published on December 6, 2022, despite the recent drop in crude oil prices, the department still expect that falling global inventories of oil in early 2023 will push Brent prices back above $90/b by the beginning of the second quarter of 2023 (2Q23). Although some downward oil price pressure could emerge in the second half of 2023 (2H23) based on the forecast of rising oil inventories, that pressure will likely be balanced by the ongoing possibility of supply disruptions or production growth that is slower than our forecast. We forecast the Brent crude oil spot price will average $92/b for all of 2023.
Total petroleum inventories: Although the department estimate that petroleum inventories have increased thus far in 2H22, commercial petroleum inventories in OECD countries spent most of 2022 at their lowest levels in five years on a days-of-supply basis, and we expect that they will remain near the bottom of their recent five-year (2017–2021) range throughout 2023. Given relatively low global petroleum inventories and the necessary time and magnitude of inventory builds needed to replenish them, the market has limited slack during the forecast period, and any unplanned supply disruption has the potential to increase oil prices quickly and significantly.
Significant uncertainty remains around the impact that sanctions on Russia will have on global oil prices. The EU ban on seaborne imports of crude oil from Russia took effect on December 5, and the ban on petroleum product imports is set to begin on February 5. The EU and UK have indicated that they will continue to allow non-member countries that participate in the G7’s price cap to access EU and UK based shipping insurance to import crude oil and petroleum products from Russia. We expect that most of Russia’s crude oil exports that will no longer go to Europe will find a destination elsewhere. However, we expect Russia’s oil production will continue to decline in 2023, largely because a number of countries will decrease their imports of crude oil and petroleum products from Russia.
The U.S. Department of the Treasury issued General License (GL) 41 at the end of November, allowing Chevron to resume oil production in Venezuela for export to the United States. This issuance introduces additional uncertainty related to our oil production forecast for Venezuela. Chevron’s ability to increase production will depend on the state of production facilities, which have yet to be evaluated. We have raised our outlook for Venezuela’s production starting in 1Q23.
