Oil Prices On Track to Finish 2022 Moderately Higher

Oil prices strengthened on Friday to potentially record their second straight annual gains, although more modest than previous, in a turbulent year affected by tight crude supplies due to the Russia-Ukraine conflict, a higher dollar, and faltering demand from top importer China.

Brent crude futures added 0.5% to $83.88 per barrel after losing 1.2% on Thursday. The global benchmark is on track to end 2022 with a gain of 7.6%, having risen 50.2% in the previous year.

Brent rose in March to $139.13 per barrel, its highest level since 2008, as concerns over supply and energy security grew due to Russia’s invasion of Ukraine.

The US West Texas Intermediate (WTI) crude futures surged 0.4% to $78.72 per barrel following a weak close in the previous session. It was set to climb 4.5% this year after soaring 55% in 2021.

Analyst Leon Li said a falling consumption due to a falling economic environment next year would offset tight supplies, despite an increase in year-end holiday travel and Russia’s move to ban sales of crude and oil products keeping oil prices in the green.

The global jobless rate is expected to grow quickly next year, curbing energy demand, which may push prices down to $60 in 2023, according to Li.

Coal, Natural Gas Set for a Strong End

Meanwhile, coal and natural gas markets are on track on Friday to finish the year strongly as well, after the worldwide energy crisis caused by the Ukraine war fueled a sharp surge in prices, while the possibly tighter supplies in 2023 could drive gains further.

Industrial metals, iron ore, and rubber are expected to end in the red due to China’s strict COVID restrictions this year and concerns over a global recession.

Commodities, including grains and palm oil, reached all-time highs in March on unfavorable weather and pandemic-related supply disruptions, leading to food inflation. However, such agricultural goods lost most gains in the second half.

A US investment bank stated that while prices have recently dropped, commodities were still likely to end 2022 as the best-performing asset class.

From a fundamental standpoint, the situation for most commodities in 2023 is more bullish, the bank said.