Barclays said on Tuesday it remained “constructive” on oil prices, but cautioned that a worsening in global manufacturing activity could pose a downside risk to its current $98 per barrel Brent price forecast for 2023.
“Given the challenging macroeconomic backdrop (we) highlight $15-25/barrel of downside to our forecast if the slump in global manufacturing activity worsens similar to the 2008-09 episode” and “would imply 1-2 million barrels per day downside to our demand estimates,” the bank said in a note.
The global benchmark Brent crude was trading at around $79.80 a barrel on Tuesday.
“The cyclical demand trends are pointing south for oil, but the structural trends on the supply side – slowing U.S. output growth, a proactive OPEC+ and the effect of sanctions on Russian supplies – have kept prices supported significantly above pre-COVID-19 levels,” the bank said.
Moscow in December signed a decree that bans the supply of oil and oil products to nations participating in the Group of Seven (G7) price cap from Feb. 1 for five months.
The bank estimates a decline of 700,000 barrels per day Q4-to-Q4 in Russia’s liquids output in 2023.
Barclays also noted that while China’s reopening has had a “sputtering start”, it did not discount the potential boost to demand from the country given the “massive change in COVID-19 response function recently” and forecast Chinese oil demand to increase 1.1 million barrels per day in 2023.
