Buckle Up - The Rise in Oil and Gas Prices is Coming

In this article, Alain Freymond, our Group Chairman, and Ahmad Saidali, our Group CEO, share their insights on the anticipated increase in global demand for crude oil, which is expected to surpass 100 million barrels per day in 2023.

Global demand for crude oil will exceed 100 million barrels per day in 2023

The US strategic reserves will further decline in the short term. President Biden's decision to release an additional 26 million barrels in the coming months will further reduce the level of reserves below 350 million barrels, with an undisclosed aim of countering Russia's announcement of a 0.5 million barrels per day production cut. The recent rise in gasoline prices and rebound in crude oil prices are also likely factors in this decision aimed at reducing potential tensions in the energy market and the risks of gasoline price increases. The strategic reserves have now been reduced by over 200 million barrels, or about 50%, and are currently at their lowest level since 1983.

In historical comparison, the GDP of the US economy is now 21 trillion dollars, whereas it was only 7.3 trillion in 1983. As a result, the current ratio of US strategic reserves to GDP is three times lower than it was in 1983. Crude oil prices were $30 at that time, and inflation was at 3.8% per year.

However, in our view, this decision will have only a limited impact on the energy market balance. Gas prices, which are at their lowest since October 2020, have now corrected by 85% from the peak of $10 per MMBtu.

Global demand for crude oil is expected to increase by +2.3 million barrels per day, according to OPEC, and will certainly exceed 100 million barrels per day for the first time in 2023. In this context, crude oil and gas prices are expected to significantly appreciate in the coming months.