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• WTI crude oil is flat on the year
• 2023 might bring even lower prices if supply and demand imbalances continue
• A deeper global economic recession could push oil prices lower

WTI crude oil is back at levels seen at the start of the trading year. In other words, oil is flat on the year, which is pretty remarkable given the global geopolitical events.

In February this year, the Russian invasion of Ukraine led to higher oil prices. At one point, the WTI crude oil price traded close to $130/barrel, which also marked the top of the year.

To many, oil is due for a rebound. But what if the opposite happens? What events might push the oil prices even lower in 2023?

(Click on image to enlarge)

Oil chart by TradingView
 

A deeper global recession than expected

As covered in this article, most economists expect a global recession in the first half of the next year. But no one knows how severe it would be.

The consensus is that the US economy will enter a mild recession, and any deeper one would have an impact on global growth, hence, on the global demand for oil.
 

Chinese COVID-19 cases getting out of control

China has recently opened and given up its zero-covid policy. The result is a surge in COVID-19 cases as the health system barely faces the waves of infected people.

If the cases get out of control, the negative impact on the Chinese economy may also dampen economic growth and, implicitly, the demand for oil.
 

Further expansion of the US shale oil production

The revolution in the shale oil industry in the United States led to the country regaining the position of the largest oil producer in the world. Should the expansion continue, the supply and demand imbalance may lead to lower oil prices in 2023.
 

A settlement in the war in Ukraine

The war in Ukraine is a wild card. As seen in February this year, the start of the war led to a spike in oil prices.

Therefore, any settlement in the war in Ukraine should have the opposite effect.
 

Regime change in Iran

Finally, a regime change in Iran would see Iranian oil hitting the market. The quantity would be large enough to disrupt the supply/demand balance, a fragile one for oil in light of the energy crisis that characterized 2022.

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