Oil prices will trade above $100 in 2023 unless there's a deepening recession or easing of Russia's war in Ukraine, BofA says

Russian President Vladimir Putin takes part in remote electronic voting at his residence outside Moscow during parliamentary election, September 17, 2021.
Sputnik/Alexei Druzhinin/Kremlin via REUTERS

Bank of America forecasts that Brent crude will trade above $100 a barrel in 2023.
Both a deepening recession or a ceasefire in Ukraine, however, could cause crude prices to drop.
Sanctions relief on Russian oil could potentially "release up to 100 million barrels of oil into the market," BofA said.

Analysts at Bank of America expect oil prices to continue to stay above $100 in 2023, but a deepening recession or a ceasefire in Ukraine could bring that figure lower.

The bank's $100-a-barrel forecast for next year comes as recession fears have already weighed on crude oil prices. But Brent crude has fallen from roughly $125 a barrel in June to a recent low of $94.50 a barrel thanks to seasonal factors, as well as easing US-Saudi relations.

They added that fuel risks in Europe with oil, coal, and gas will remain for the foreseeable future, however, and warp the global energy map.

But prices could sink below the BofA's $100 forecast in the event of a deepening recession.

"Global oil demand has historically fallen on average by 640k b/d during IMF world recessions (1975, 1982, 1991, 2008), and it did contract by much more during 1980-81 and 2009," BofA analysts wrote in a Friday note.

Analysts added that the current downturn is different from the past due to the strained supply and demand dynamics.

"The difference now compared to previous recessionary environments is that the pullback in demand has been essentially triggered by a supply shortfall," BofA said. "In turn, the adjustment mechanism to bring scarce available molecules into balance with demand has been higher prices."

But if Russia halts its invasion of Ukraine or eases hostilities, oil prices could see some relief.

According to the BofA: "Energy supply chains have lengthened in recent months and sanctions relief on Russian oil could reverse some of these flows, potentially releasing up to 100 million barrels of oil into the market."

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