The EU partially banned imports of crude oil from Russia (positive for prices), OPEC+ fast forwarded increases in their production target (negative for prices), Shanghai’s economy reopened (positive for prices) and both the OECD and World Bank sounded the recession alarm (negative for prices).
Concerns that the global economy could be heading for a recession have risen sharply, which we believe is helping to temper prices. Admittedly, assessing the impact that a recession could have on global oil demand is rather tricky as much will depend on the severity of the downturn (i.e., soft or hard landing). For now, we remain in the soft landing camp as many Western economies appear capable of absorbing the blow of higher central bank policy rates due to the strength of the job market.
To reflect the balance of these risks, we have revised up our annual forecasts for benchmark West Texas Intermediate (WTI) crude to US$105/bbl in 2022 and $95 in 2023 (from $100 and $85). Nonetheless, with global supply appearing to be under greater threat than demand at the moment, we think that pricing risks may be still skewed towards the upside. - BMO Capital Markets
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