HOUSTON, Dec. 8 (Xinhua) -- As demand for all fossil fuels is set to increase in 2023, the coming year is expected to be the beginning of global commodity market rebalancing, to which energy security and policy remain key risks, experts said on Thursday.
RECALIBRATION
The recalibration of global energy markets, which have been battered by the COVID-19 pandemic, an uneven recovery, swings in OPEC policy, and record uncertainty around energy supply in the wake of the Russia-Ukraine conflict, will outlast 2023, analysts at S&P Global Commodity Insights told an online media briefing when announcing their 2023 Energy Outlook.
"Even if commodity supply/demand balances loosen more than expected in the coming year, almost all markets will require another year or more of recalibration before inventories, balances, and prices return to a more sustainable equilibrium," said the report.
The drivers of energy supply are shifting more toward policy over economics, increasing volatility, the report noted, citing policy responses to the Ukraine crisis, especially the price cap on Russian supply, as well as the swinging probabilities of an Iran nuclear deal, recent loosening of some sanctions on Venezuela, and OPEC's production quota policies.
"It's a policy-driven future for energy markets, which will foster uncertainty and volatility", said Shin Kim, head of Oil Supply and Production Analytics with S&P Global Commodity Insights.
SUPPLY VS DEMAND
According to the report's forecast, global oil supply will grow slower in 2023 at around 1.7 million barrels per day (b/d), down from the 4.5 million b/d growth in 2022 due to greater losses from Russia and limited upside from OPEC.
While there has been a growing narrative that the U.S. shale revolution is over, U.S. shale oil supply is expected to surge by 0.7 million b/d alone, with additional growth in crude production coming from Norway, Brazil, Canada, and Guyana, said the report.
On the demand side, "China's COVID policy is the most important factor for global energy demand in 2023," said Dan Klein, head of Energy Pathways with S&P Global Commodity Insights, at the briefing.
Meanwhile, India's energy demand will likely grow in 2023, particularly if it continues to be a key source of demand for Russian energy that would normally go to Europe, Klein said.
For natural gas, particularly liquefied natural gas (LNG), global supply growth will be limited in 2023 despite extremely high prices, due to a lack of new liquefaction facilities coming online, said the report, adding that Europe will see even less Russian gas supply in 2023 than in 2022, requiring considerable demand destruction.
In general, commodity prices are expected to ease over 2023, as fundamentals pull toward recalibration. Natural gas, coal, and crude oil prices are all expected to be lower in 2023 than in 2022 on average, the report noted.
Once again, as demand for all fossil fuels will surge in 2023, global CO2 emissions are expected to rise, the report said, noting that energy security/affordability and energy transition decisions will become even more difficult and complex. ■
