Oil & Gas in 2023: Be Prepared for Another Year of Market Turbulence

Crude oil and natural gas prices in 2022 were marked by excessive volatility. Although prices reached multiyear highs midyear, the conclusion of 2022 saw prices fall to approximately the levels from which the year began. Further turbulence in the oil and gas markets is expected to continue in 2023, mainly driven by demand fluctuations tied to the widely anticipated global economic slowdown. With respect to supply, the ongoing Russian-Ukrainian war and the sanctions, embargos, and price caps on Russian oil exports, along with OPEC+ production policies, will play an important role in market stability.

Key highlights include the following:

-- Our price forecasts remain unchanged, with our base-case scenario assuming a West Texas Intermediate oil price of USD 90/barrel (/bbl) for 2022, USD 65/bbl for 2023, and USD 60/bbl for 2024. Beyond 2024, our long-term price outlook is USD 60/bbl.
-- Oil and gas companies have taken advantage of high prices to strengthen their credit profiles. By prioritizing paying down debt and returning capital to shareholders, balance sheets and key credit metrics are the strongest they have been in years.
-- Credit ratings for oil and gas issuers are expected to trend in a positive direction. Capital spending (capital expenditure) programs in place for 2023 are relatively modest, as companies have indicated they will continue exercising capital discipline. In addition, the significant progress made by companies in reducing financial leverage, enhancing capital flexibility, and reinforcing liquidity has them much better positioned to weather a decline in prices.