US investment bank Goldman Sachs expects Brent crude to trade at $105 a barrel by the fourth quarter of 2023, driven by a “solid” growth in global oil demand.
It expects oil demand to grow by 2.7 million barrels per day this year and said the market would be back in a deficit in the second half of 2023.
This should allow the Opec+ alliance to unwind its October production cut in the second half of the year, said Goldman Sachs.
However, if the market turns out to be softer, then alliance “could stick to its October cuts or cut production even further, given its significant pricing power”.
“Overall, this ‘Opec put’ limits the downside risks to our bullish oil price forecast,” the lender said.
In October, the Opec+ group of oil-producing countries slashed its collective output by 2 million bpd until the end of 2023 on concerns of a global economic slowdown.
The group stuck to its production targets in December amid fears that sanctions on Russian oil exports would significantly reduce global crude supplies.
The impact on oil prices of news surrounding Opec+'s supply has grown “larger” in recent years, suggesting that the group’s pricing power is now much “greater than usual”, the investment bank said.
This has been aided by US shale producers’ inability to increase output and the lack of immediate substitutes to crude oil, Goldman Sachs said.
Meanwhile, crude futures have registered sharp declines since the start of 2023 amid concerns about China and the growing possibility of a recession.
Brent, the benchmark for two thirds of the world’s oil, and West Texas Intermediate, the gauge that tracks US crude, fell by more than 8 per cent last week, their biggest weekly loss in the first seven days of a new year since 2016.
Brent was 0.11 per cent higher at $79.74 a barrel at 1.48pm UAE time on Tuesday while WTI was up 0.35 per cent at $74.89 a barrel.
A stronger dollar, which makes oil more expensive for holders of other currencies, weighed on futures.
The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, was up 0.22 per cent at 103.23 on Tuesday morning. The index is lower by 1.23 per cent since January 1.
Brent rose by as much as 3.8 per cent to a session high of $81.37 on Monday on news of top crude importer China reopening its borders after about three years. It was 1.4 per cent higher at $79.65 at the time of closing.
“China has issued large import quotas for its independent refiners, implying the country is expecting a sizeable bounce back in oil demand since the Covid-19 restrictions have been lifted,” said Edward Bell, senior director of market economics at Emirates NBD.
Naeem Aslam, chief market analyst at AvaTrade, said that optimism around China's recovery is not taking prices higher as traders are concerned about the rising Covid-19 cases.
"Some traders are concerned that the reopening of trade in China has pushed the Covid numbers in the Chinese capital to their peak level. Beijing could take a U-turn towards easing its stance of scrapping zero-Covid policy," he said.
Last week, Swiss bank UBS forecast that Brent would trade at $110 a barrel in the middle of 2023 while WTI would average $107 a barrel.
China’s reopening may result in oil demand hitting a “record high” in the second half of this year, the Swiss lender said in a research note.
“Meanwhile, Russian oil production should fall in 2023 due to the European Union's embargo on Russian crude and refined products,” UBS strategists said.
An increase in production outside the Opec+ group of countries is expected to be modest, given years of underinvestment in new oil and gas projects, they said.
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
Three ways to limit your social media use
Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.
1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.
2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information.
3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.
How to keep control of your emotions
If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.
Greed
Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.
Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.
Fear
The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.
Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.
Hope
While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.
Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.
Frustration
Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.
Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.
Boredom
Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.
Tip: Open an online demo account and get your thrills without risking real money.
Essentials
The flights
Etihad and Emirates fly direct from the UAE to Delhi from about Dh950 return including taxes.
The hotels
Double rooms at Tijara Fort-Palace cost from 6,670 rupees (Dh377), including breakfast.
Doubles at Fort Bishangarh cost from 29,030 rupees (Dh1,641), including breakfast. Doubles at Narendra Bhawan cost from 15,360 rupees (Dh869). Doubles at Chanoud Garh cost from 19,840 rupees (Dh1,122), full board. Doubles at Fort Begu cost from 10,000 rupees (Dh565), including breakfast.
The tours
Amar Grover travelled with Wild Frontiers. A tailor-made, nine-day itinerary via New Delhi, with one night in Tijara and two nights in each of the remaining properties, including car/driver, costs from £1,445 (Dh6,968) per person.
The five pillars of Islam
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