Crude oil prices were on a roller coaster ride in 2022, going north of $130/barrel in March amid the Russian invasion of Ukraine. Today, West Texas Intermediate (CL=F) is trading at around $80 while Brent International (BZ=F) is hovering above $83/barrel.
A slowing worldwide economy, China's recent lockdowns, and a stronger dollar have brought the price of oil down more than 23% in the last six months.
As part of our series, "What to do in a bear market," we checked in with economists and oil analysts to get their forecast for the commodity in 2023. Here are some of their predictions and the reasons behind them.
Average oil price/barrel projections:
Citi: Brent $80, WTI $75
"Our base case, by the way, is that oil demand growth next year is going to be around 1.2 or 1.3 million barrels a day. And our base case is that supply will be growing by twice that amount over the course of the next year, a good bit of that coming from the Western Hemisphere, from the US, Brazil, Canada, Guyana, Argentina, maybe Venezuela and even Mexico."
- Ed Morse, Citi global head of Commodities Research on Yahoo Finance Live
JPMorgan: Brent $90
"Our forecast of $90 Brent in 2023 rests on the view that OPEC+ alliance will do the heavy lifting to keep markets balanced next year. We expect supply to grow at 30% above the pace of demand in 2023, as Russian production fully normalizes and a combination of conventional (Brazil, Norway, Guyana) and nonconventional projects (US, Canada, Argentina) supplies an additional 1.6 mbd."
- Natasha Kaneva and team, Global Commodities Research, JPMorgan
OPIS: Brent $95-96, WTI $90
"The 2022 average price for WTI looks to be right around $94.50/bbl. We suspect that 2023 will see a price only slightly below this number with $90/bbl a reasonable prophecy for WTI, with $95-$96/bbl likely for Brent. Precisely how high these numbers move above the average will depend on the successful reopening of China and the ability of western countries to avoid a significant recession."
- Tom Kloza, Global Head of Energy Analysis, and Denton Cinquegrana, Chief Oil Analyst at OPIS
Infrastructure Capital Advisors: $80-$100/barrel
"We expect oil to trade in the $80-$100 range while the Ukrainian war continues," adding that "China oil demand likely to recover as it emerges from zero-COVID lockdown policy."
- Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF
What about energy related stocks?
Energy related commodities are ending the year as the clear winner among the sectors, with XLE (XLE) up 55% year to date.
Investors may be wondering if they can repeat their stellar 2022 performance in 2023.
"That's a battleground topic, as I would call it, " CIBC Private Wealth U.S. senior energy trader Rebecca Babin told Yahoo Finance Live.
"I think it's going to be a harder trade in 2023, but I think it's a trade that can still work, based on the fact that these companies are not making rash decisions about increasing production when the crude— when crude rallies," said Babin. "They are less levered, they are more disciplined, and they are super focused on returning cash to shareholders."
Based on relatively low valuations, energy stocks could trade very well, added the strategist.
"Now, I don't know if they're going to outperform the rest of the market the way they have this year, but I think there's a long-term, 2023 to 2024 structural trade in U.S. energy equities that will produce good results," said Babin.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre