Market Overview and Industry Outlook Crude Oil Market and Situations in 2022 Dubai Crude price averaged USD 96.3 per barrel in 2022, a steep climb from 2021 by approximately USD 27 per barrel. Although the average price surged, oil prices fluctuated greatly. Initially, the OPEC Plus adopted a policy to gradually increase production in line with the steady rise in oil demand in the aftermath of COVID-19 pandemic. After the outbreak of war between Russia and Ukraine on February 24, 2022, the market expected Russia’s oil and gas exports to be hit with devastating impact from Europe and US economic sanctions. Crude prices shot up and peaked at USD 120 per barrel in June 2022. By early Q3, prices began to settle lower on recession fear following widespread high inflation around the world. Central banks hiked interest rates in response. The Federal Reserve announced 7 consecutive rate increases, totaling 4.25 per cent to a range of 4.25-4.50 per cent The US released its Strategic Petroleum Reserve (SPR) to dampen oil prices to cushion impact of runaway inflation. Throughout the year, up to 200 million barrels of oil from the SPR had been released, cutting back the oil reserve to about 380 million barrels, the lowest level in 40 years. Meanwhile, prices continued to decline in Q4 due to COVID-19 resurgence in China, pushing back the recovering demand. The closing oil prices in December were at the lowest of 2022 at approximately USD 77 per barrel. In addition, the war between Russia and Ukraine resulted in an extremely high crude premium, directly affecting the cost of crude oil that the company purchased as feedstock for its oil refining business. Crude Oil Price Forecast for 2023 Dubai crude spot price will likely move in the USD 85-95 per barrel range, buoyed by optimism over the lifting of COVID-19 restrictions by countries around the world. Oil demand is expected to increase, especially in China, the world’s single biggest net oil importer, which is expected to drive crude oil prices. Oil supply is expected to remain tight as the spare capacity of the OPEC Plus amounts to only 3-4 million barrels per day. US production is expected to rise gradually as US shale oil producers focus on maximizing profits rather than boosting capacity as in the past. US production is expected to reach 13 million barrels per day, which is the highest pre-COVID-19 level. In addition, the US crude oil stocks remain at an extremely low level, posing a risk in the event of a supply disruption. Issues that must be closely monitored include rising demand after China lifted COVID-19 restrictions, high inflation that could lead to a recession, and the impact of Europe and US economic sanctions against Russia, as well as the direction the Russian-Ukrainian war takes. 56-1 One Report 2022 72 IRPC PUBLIC COMPANY LIMITED
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