Karachi, November 17, 2022 (PPI-OT): Pakistan Oil and Gas: Oil pressure building up

Crude oil demand is expected to remain under pressure through the majority of next year, with continuation of strict COVID-19 lockdowns in China and a global economic slowdown.

Economic challenges are being faced by major economies, including China, the USA and the UK, which would keep demand for crude oil capped.

The US is expected to enhance its production rate from 11.8mn BPD in CY22 to 12.3mn BPD in CY23, depicting an increase of 4.1%, or 480k BPD. OPEC is expected to counter the output enhancement from the US, wherein members are singularly focused on shoring up prices by curtailing production levels.

In anticipation of a harsh winter this year, Natural Gas stocks were built up in Europe and America. However, milder-than-expected winters so far this year led to a retracement in prices. This has led to the comparative attractiveness of crude oil diminishing.

We, therefore, opine that while there would be some volatility in the prices, the average for the remainder of the year would settle at ~US$90/bbl for Brent futures. To note, Brent futures have averaged US$96.8/bbl