Oil prices generally aren’t expected to change too much this year, but two questions loom over that outlook, The Wall Street Journal reports: Will China have the workers needed to rev up its economy as the country loosens its COVID restrictions? And will American energy companies focused on fracking stick to their recent reluctance to bankroll another expensive oil boom?
Brent, the international oil standard, peaked above $127 a barrel last year but has since tumbled, trading around $84 a barrel Thursday. Around two-thirds of energy executives surveyed by the Federal Reserve Bank of Dallas late last year expected West Texas Intermediate oil prices—which tend to fluctuate a few dollars a barrel below Brent—to end 2023 between $70 and $90 per barrel. The forecast is based largely on the fact that analysts expect global oil supply to outpace demand this year as economic growth slows.
The biggest wild card for oil prices is China. Analysts at Bank of America Corp. expect China’s economy will add 700,000 barrels a day to global growth in oil demand this year. But uncertainty surrounding the trajectory of coronavirus cases in China could affect the country’s economic rebound, they say.
U.S. energy companies that rely primarily on fracking—which account for nearly two-thirds of U.S. oil production—are maintaining a cautious approach to start 2023, pledging not to overspend in an effort to ramp up production and focus instead on maximizing profits.