3 bold oil market predictions for 2023

3 bold oil market predictions for 2023
3 bold oil market predictions for 2023

The past year will probably mark a turning point in the energy sector. After years of underperformance, energy stocks soared in 2022. While rising energy prices played a key role, an even bigger catalyst was that energy security became a top priority. for most countries after Russia invaded Ukraine. The fallout from this ongoing conflict is likely to have a major impact on the sector this year.

Nobody knows exactly how 2023 will unfold. However, I’m going to take a chance on making some bold predictions about what I believe we’ll see in the oil stain in the coming year.

Oil prices again top triple digits

Last year, I boldly predicted that oil prices would remain high and could rise above $100 a barrel again. With supplies still tight in the wake of the pandemic and demand picking up, the stage looked set for a possible major spike in crude prices in the event of a supply disruption. This is exactly what happened after Russia invaded Ukraine.

Another the bull market is coming for oil in 2023. Supply remains constrained because oil companies continue to be cautious about investing in expanding production. In addition, there is a lot of uncertainty about the supply from Russia. It recently banned oil exports to countries that implemented price caps on its oil in response to its ongoing war with Ukraine. Finally, the United States stopped drawing on its Strategic Petroleum Reserve (SPR).

Meanwhile, on the demand side, China looks set to fully reopen its economy. There could be a huge pent-up demand from this country. While a global economic slowdown could affect demand, the continued return to normal post-pandemic could keep consumption high.

All of these signs point to higher oil prices in 2023, with many Wall Street analysts expecting crude to break above $100 by the middle of the year. I agree.

Carbon capture will become one of the hottest investment trends in 2023

While climate change remains a top concern for governments around the world, energy security has become an equally important priority. This leads countries to seek solutions to both problems. Carbon capture and sequestration (CCS) is one that is emerging as a potential game changer. The technology captures carbon dioxide and sequesters it underground. As a result, it reduces the emissions profile of fossil fuels.

Oil companies see CCS as a multi-trillion dollar business opportunity. Because of this, oil giants like Chevron (CLC 0.66%), Exxon (XOM 1.01%)and western oil (OXY 1.14%) are invest heavily in CCS technology and projects.

I think 2023 will mark an inflection point for CCS. We will see more countries and companies buy into the idea that CCS can become an important part of the solution to climate change. This should lead to considerable investment in the sector. It should also support stock prices of energy companies that are early movers in the space, such as Occidental Petroleum, which plans to develop 100 direct air capture facilities for CCS globally in the coming years.

The next wave of LNG projects begins construction

Another fuel that can be a solution to global energy security and emissions issues is liquefied natural gas (LNG). Natural gas is abundant in some parts of the world and has a lower emissions profile than oil and coal (it can even become net zero thanks to CCS). For this reason, it could become the key to solving Europe’s energy crisis now that Russia has cut gas supplies to the continent.

According to ExxonMobil, the fuel is scarce. This is why we will see several LNG export facilities making positive final investment decisions over the coming year. There are many in the pipeline, including projects supported by Energy transfer (AND 0.08%), Devon Energy (DVN 0.77%)and Conoco Phillips (COP 1.38%). Energy Transfer has been working on its Lake Charles LNG project for years. The intermediary company is expected to finally approve this project in 2023, which could significantly increase its valuation and long-term growth prospects.

The future of the oil industry will become clearer in 2023

Russia’s invasion of Ukraine has dramatically changed the long-term outlook for the oil market. Along with other catalysts, this war will likely keep oil prices high in 2023. As a result, energy security will remain a priority, driving a new wave of LNG investment. CCS will also emerge as a viable long-term solution to extend the life of the fossil fuel sector. Given this outlook, I expect oil stocks to do well again in 2023, especially those with CCS and LNG projects underway.

. bold oil market predictions

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