One thing seems certain in 2023 amid global economic uncertainties: Commodity prices will trend downward, according to forecasts from the U.S.-based Energy Information Administration (EIA) and the World Bank, as well as smaller institutions such as Wells Fargo and Enverus.

The Energy Information Administration (EIA) and the World Bank expect lower crude oil and natural gas prices in 2023 compared to 2022 due to uncertainties around issues spanning from Russia’s war in Ukraine and its various fallouts, such as reduced energy supply and the subsequent European energy crisis, to China’s ongoing efforts to contain the COVID-19 pandemic.

 Commodity Price Outlook 2023
Source: Energy Information Administration (EIA), World Bank, Wells Fargo, Welligence Energy Analytics 1: Welligence doesn't forecast oil and gas prices (i.e. based on supply/demand fundamentals) but does generate assumptions using data from the future market for use in its valuation models. Estimates for 2022 and 2023 courtesy of CME Group.
   2019a 2020a  2021a  2022f  2023f 
 Energy Information Agency (EIA)          
 WTI ($/bbl)  $56.99 $39.17   $68.21   $95.22  $86.36 
 Brent ($/bbl)  $64.34  $41.69 $70.89  $101.48  $92.36 
Henry Hub ($/Mcf) $2.67 $2.11 $34.06 $6.74 $5.64
Henry Hub ($/MMBtu) $2.57 $2.03 $3.91 $6.48 $5.43
World Bank          
 WTI ($/bbl) - - - - -
Brent ($/bbl) - $42.30 $70.40 $100.00 $92.00
Henry Hub ($/Mcf) - - - - -
Henry Hub ($/MMBtu) - $2.00 $3.90 $6.60 $6.20
 Wells Fargo          
 WTI ($/bbl)  $56.99 $39.24  $67.98  $94.41  $88.00 
Brent ($/bbl) $64.15 $43.21 $70.83 $99.32 $92.00
Welligence Energy Analytics1          
WTI ($/bbl) - $41.96 $70.86 $101.92 $79.83
Henry Hub ($/Mcf) - $2.04 $3.91 $6.50 $5.66

EIA outlook

EIA forecasts Brent and WTI oil prices will respectively average $101.48/bbl and $95.22/bbl in 2022 and $92.36/bbl and $86.36/bbl in 2023. Oil price declines in the last quarter of 2022 have been primarily over market concerns regarding global economic growth and COVID-related lockdowns in China that have reduced the Asian country’s oil demand, the agency said in Dec. 2022 in its recent “Short-Term Energy Outlook (STEO)” report.

The EIA also forecasts Henry Hub gas prices will average $6.48/MMBtu in 2022 and $5.43/MMBtu in 2023. The agency forecasts gas prices to rise in the last month of 2022 due to colder weather and higher gas demand and rising LNG exports.

“Despite the recent drop in crude oil prices, we still expect that falling global inventories of oil in early 2023 will push Brent prices back above $90/bbl by the beginning of the second quarter of 2023,” the EIA said. “Although we expect some downward oil price pressure could emerge in the second half of 2023 based on our forecast of rising oil inventories, that pressure will likely be balanced by the ongoing possibility of supply disruptions or production growth that is slower than our forecast.”

The EIA expects U.S. refinery utilization to remain close to its five-year average through 2023. The agency expects lower distillate prices in the first half of 2023 “due to a combination of a slight contraction of the U.S. economy and refinery maximization of distillate fuel production,” as well as U.S. diesel refining margins to decline by 19% in 2023 compared to 2022.

World Bank outlook

Supply concerns will persist in energy markets as winter settles in around the world, especially in Europe. Any resulting global economic slowdown presents a key downside rise, especially for oil and metal prices, the World Bank announced Oct. 2022 in its “Commodity Markets Outlook” report.

The World Bank forecasts Brent to average $100/bbl in 2022 and $92/bbl in 2023, well above the five-year average of $60/bbl, while gas prices are forecast to average $6.60/MMBtu in 2022 and fall from a record high to $6.20/MMBtu in 2023.

“Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years,” said Pablo Saavedra, the World Bank’s vice president for equitable growth, finance and institutions. “A further spike in world food prices could prolong the challenges of food insecurity across developing countries. An array of policies is needed to foster supply, facilitate distribution and support real incomes.”

Higher energy commodity prices, which serve as inputs to agricultural production, have pushed up food prices. Over the first three quarters of 2022, average food-price inflation was over 20% in South Asia and between 12%-15% in Latin America and the Caribbean, the Middle East and North Africa, Sub-Saharan Africa, and Eastern Europe and Central Asia, the organization said. The only region to report low food-price inflation, mainly due to stable rice prices, has been East Asia and the Pacific regions.

What others are saying

Smaller institutions are similarly forecasting the same commodity price trend in 2023. Wells Fargo, Enverus subsidiary Enverus Intelligence Research (EIR) and Welligence Energy Analytics all forecast or assume lower oil and gas prices next year, while OPEC again warned of uncertainties.

Wells Fargo: Wells Fargo’s most recent commodity price deck “reflects expected recessionary conditions across the OECD in 2023 offset by the expected COVID-era lockdown exit from China, favorable uplifts from fuel switching, modest production growth net of sanctions, service inflation and constraints and minimal global spare capacity.”

“Upside risks flow mostly from tighter sanctions and unplanned outages. Downside risks derive from warmer winter weather, a deeper global recession or delayed China recovery,” Wells Fargo analysts Roger D. Read, Lauren Hendrix Walker, Hanwen Chang and Rosalie Chen said Dec. 15 in their “Oil Macro: Crosscurrents Galore” report.

“The general downtrend in our price forecast through 2024 reflects our expectation of fewer supply shocks amid modest production growth,” the analysts continued.

“The recent decision by the Biden administration to ease sanctions on Venezuela should result in increased U.S. imports of that heavy/sour crude and ease oil prices. OPEC+ appears biased towards price support and production curtailments, which should be supportive of oil prices,” the analysts said. “We do not expect the U.S. crude oil SPR to be refilled at any time in 2023, which may remove some support from the crude oil market.”

Enverus: EIR’s “Macro Forecaster” report authored by Bill Farren-Price and published on Dec. 6 expects near-term recession concerns and oil price weakness not to obscure a tight supply outlook for 2023.

The outlook should spark a Brent price beyond $100/bbl on the back of OPEC supply management and EU sanctions on Russian exports, said Farren-Price, who forecasts NYMEX gas prices of $5.10/MMBtu this winter declining to $3.50/MMBtu in the summer of 2023.

“A full removal of COVID-19 restrictions in China is not expected,” Farren-Price said in the report that looks at near-term oil and gas balances, recession risks, Russian-Ukraine war impacts, COVID-19 demand impacts in China and OPEC’s decisions on oil supply. “Measures may be relaxed, but the threat of fresh shutdowns will undermine Chinese business confidence and oil demand.”

OPEC: OPEC, whose members have produced an average 28 million bbl/d or more in recent months, highlighted key factors to watch next year in its recent “Monthly Oil Market Report (MOMR).”

“The year 2023 is expected to remain surrounded by many uncertainties, mandating vigilance and caution. This is reflected in the continued proactive and preemptive joint efforts of the Declaration of Cooperation to provide stability and balance to the global oil market, amid rapidly evolving market conditions,” OPEC said in its Dec. 2022 MOMR.


2023 Capex Outlook: A Wake-Up Call for All?

Recent upward movements in oil futures prices on both sides of the Atlantic happened “amid elevated volatility and heavy selloffs in futures markets, including from hedge funds and money managers,” the cartel said.

“Downside pressure on futures prices persisted as the outlook for oil demand deteriorated due to extended lockdowns in China and worries that continuing aggressive monetary tightening from major central banks could hinder economic growth. Meanwhile, concerns about the supply outlook eased, amid signs of a well-supplied crude market and transpiring details about the G7 price cap on Russian crude,” OPEC continued.