Both natural gas and oil prices are under great uncertainty, mainly dependent on the geopolitical situation in Europe

Please elaborate on the natural gas and crude prices in the near future. What do you consider as the driver of prices in 2023?

Natural gas prices have recently fallen mainly due to milder weather in recent months and more cautious European spending amid uncertainties regarding Russian supply cuts. Should the remaining winter months become colder, it may spike up the natural gas demand and therefore boost its price. Furthermore, even if the current heating season may not demand as much gas as expected, there may be difficulties to fill up the gas reserves for the upcoming seasons as long as the geopolitical conflict in Europe is not resolved.

Despite the calls for increasing oil production from the West, OPEC+ has elected to decrease its output target by 2MMbbls/d from November 2022 until the end of 2023. Lowered supply may lead to tighter oil markets having a boosting effect on oil prices. Furthermore, the opening of the Chinese economy may increase the demand for oil and its products adding fuel to this boost.

Both natural gas and oil prices are under great uncertainty, mainly dependent on the geopolitical situation in Europe. Overall, a growing division between the West and the East – politically and market-wise – may contribute to heightened prices for oil and gas as well as other resources in the long term.

Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)

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