According to the International Energy Forum, oil prices are expected to rise in the second half of 2023.
Christopher Furlong | Getty Images News | Getty Images
According to the secretary-general of the International Energy Forum, oil prices will rise in the second half of the year as supply struggles to meet demand.
Oil demand quickly rebounded to pre-Covid levels, “but supply is having a harder time catching up,” said Joseph McMonigle, secretary-general of the International Energy Forum, adding that the only factor holding prices down at the moment is fears of an impending recession.
“So in the second half of this year we’re going to have serious supply continuity issues and as a result, prices will react to that,” McMonigle told CNBC on Saturday on the sidelines of a meeting of energy ministers from the Group of 20 Leading Industrialized Countries (G20) in Goa, India.
McMonigle attributes the rise in oil prices to rising demand from China – the world’s largest importer of crude oil – and India.
“India and China combined will ensure a demand increase of 2 million barrels per day in the second half of this year,” the secretary-general said.
When asked if oil prices could climb back to $100 a barrel, he replied that prices were already at $80 a barrel and could potentially go higher from there.
“We will see significantly stronger inventory declines, which will be a signal to the market that demand is definitely picking up. So we’ll see how prices react to that,” McMonigle said.
But McMonigle is confident that if the world eventually succumbs to a “major imbalance between supply and demand,” the Organization of Petroleum Exporting Countries and its allies — collectively known as OPEC+ — will take action and increase supply.
“They are very careful when asking. They want to see evidence that demand is picking up and will react to changes in the market.”
September-dated Brent crude futures last ended Friday at $81.07 a barrel, while September-delivered West Texas Intermediate crude ended the day at $76.83.
No room for complacency
McMonigle also spoke about the liquefied natural gas market, attributing the stability in the European energy market to a warmer-than-expected winter of 2022.
“The weather was probably the happiest thing that’s ever happened to us,” he said, but cautioned that “it’s not just this winter, [but] “The next few winters” could be rocky.
Global policymakers must not become complacent just because LNG prices have fallen and more investment in renewable energy is needed to ensure the lights stay on, he said.
The LNG-powered container ship “Containerships Borealis” of the shipping company Borealis has moored in the port of HHLA’s Burchardkai terminal.
Picture Alliance | Picture Alliance | Getty Images
McMonigle signaled that energy security, once “whispered” has now become the main focus of summits like the G20.
“We definitely need to move forward with the energy transition and all options need to be on the table,” he stressed, adding that prices and volatility in energy markets need to be closely monitored.
“I worry that if the public starts associating high prices and volatility in energy markets with climate policy or the energy transition, we will lose public support,” he said.
“We will ask many difficult and challenging things from the public in order to make the energy transition possible. We have to keep them on board.”