BofA Sharply Lowers Forecast for Oil Price, Global Oil Consumption in 2023

Bank of America cut its forecast for Brent oil prices in 2023 amid economic pressures from rising borrowing rates, suppressed demand and disputes over the US debt ceiling issues.

BofA currently forecasts an average oil price of $80 a barrel in 2023, down 9% from its previous forecast of $88 per barrel. But this is still 5% higher than the current prices.

“Currency forces are weighing on Brent crude prices,” Francisco Blanch, head of the global commodities research team at BofA, wrote in a new report. Brent oil prices hit a yearly high above $88 a barrel in late January.

“While central banks continue to over-adjust to the last policy mistake (high inflation), bank failures and tighter lending conditions could lead to deflation and a US recession, and oil prices are rushing to reflect this forecast.” he added.

Additionally, tensions over the debt ceiling could exacerbate these macro headwinds, Blanch said, noting that the issuance cost of a US debt default is recently at its highest level since 2009.

BofA lowered its forecast for global oil consumption growth to 1.2 million barrels per day this year and 1 million barrels per day next year.

The bank kept its Brent oil price forecast for 2024 at $90 a barrel in anticipation that OPEC and its allies may cut output again to protect prices. OPEC said in April it would cut output by 1 million barrels per day.

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