In a year marked by limited supply because of the crisis in the Ukraine, a strong currency, and poor demand from China who is the biggest crude importer in the world, oil prices increased slightly on December 30 and were on course to record a second consecutive yearly gain, albeit a small one.
Brent crude futures were up 44 cents, or 0.5%, to $83.90 per barrel after closing 1.2% lower the previous day. After finishing 0.7% lower a day before, U.S. West Intermediate crude was trading at $78.88 a barrel, up 48 cents or 0.6%.
Brent is expected to end 2022 with a gain of 5.76% after increasing by 50.2% in 2021. After Russia invaded Ukraine and raised supply and energy security worries, prices soared in March to a peak of $139.13 per barrel, a high not seen since 2008.
The WTI is expected to increase 4.5% in 2022 after rising by 55% in the previous year.
According to ING analyst Ewa Manthey, this year has been an unusual year for commodity markets, with supply uncertainties leading to heightened volatility and elevated prices.
The coming year is expected to be another one of ambiguity and great volatility.
In the second half of this year, oil prices sharply declined as central banks around the world raised interest rates to combat inflation and strengthen the U.S. dollar. For owners of other currencies, this increased the cost of investing in commodities priced in dollars.
Furthermore, China’s zero-COVID regulations, which were only relaxed in December, dashed hopes for a rebound in oil consumption in the world’s second-largest consumer. A rise in COVID cases in the nation and worries about a worldwide recession are clouding the outlook for commodity consumption, even if China is expected to recover in 2023.
According to John Driscoll, director of consultant JTD Energy Services, the recent relaxation of travel restrictions was expected to stimulate oil consumption; nevertheless, the sudden spike in COVID cases in China has prompted major fears over a potential global pandemic.
In terms of future deliveries, western sanctions will compel Russia to shift more of its shipments of crude and refined goods from Europe to Asia.
Despite increased prices, output growth in the main oil-producing states of the United States has slowed. According to the Federal Reserve Bank of Dallas’ most recent survey, executives have lowered their expectations due to inflation, supply chain issues, and economic uncertainty.