Oil prices will once again surpass $100 a barrel in 2023 as tight supply matches rising demand, consulting firm Eurasia Group said.
That means a 28 percent increase in the price of international benchmark Brent crude, which traded at $77.90 a barrel on Wednesday. West Texas Intermediate crude is up 37 percent from $72.80 a barrel.
The oil market is poised to experience shocks this year amid a faster-than-expected economic recovery in China following the country's sudden exit from zero COVID policy and a shallow recession in the U.S., which will not lead to a drop in demand, write Jan Bremmer, president and founder of Eurasia Group, and Cliff Kupchan, chairman of the firm and head of global macroeconomic coverage.
They said the two factors would drive up demand for crude oil and reveal a severe shortage of new supply.
Tensions between OPEC+ and global consumers, led by the U.S., are likely to increase as the oil cartel wants to protect a minimum price of about $90 a barrel for Brent, which conflicts with the lower oil prices consumers want.
Higher prices will force the U.S. to directly intervene in markets and punish the actions of oil-producing states that it considers (at least in part) politically motivated, Eurasia Group forecasts.
Meanwhile, natural gas prices in the U.S. will rise and tensions will be felt due to the European Union's need to rebuild gas storage facilities from the second quarter of this year due to the lack of cheap supplies from Russia.
China's economic recovery and increased global demand for liquefied natural gas will likely drive U.S. natural gas prices closer to or above $8 per million British thermal units.
Last year, natural gas surpassed $8 as demand in Europe contributed to higher prices in the U.S. They have since fallen due to unseasonably warm weather and traded around $4.056.
