We expect oil prices to be largely influenced by demand in emerging economies: Wood Mackenzie

Thanks, Tan, for having us here. Now, this year, we expect prices to be largely influenced by the demand growth in the emerging economies, particularly the impact of reopening of China. So if you look at for quarter one, the prices remain supported around 84, 85. Dollar per battle, one because of the reopening of China's and demand growth stabilizes. The second is the fear of a large loss of supply from Russia also has minimized now. So that that stops supporting the prices to the levels we have seen last year. And third, you know, we see high crude demand from the refining sector to support the diesel market after the EU ban on Russian products came in place.

So yes, at the end, we shouldn't also forget that the demand growth is also dependent upon the global economic recovery, which still remains fragile. We're expecting a weaker GDP growth for this year compared to last year, particularly in the OECD economies. So we expect larger downside risk from the OECD economies, you know, quickly from the high inflation, high interest rates. And you know, not to forget, you know, any escalation, you know, in the geopolitics around Russia, Ukraine crisis could also deal the global economy. How much of a wildcard is Russian supply in particular right now? Well, if you look at Russia's crude exports, now after the ban on Russian crude import from EU, they there was an e-jerk reaction in December where it went down. But you know, they have we have seen the exports reemerging back and rebounding again to more than 3 million barrels per day. You know, the I'm talking about the waterborne export from Russia.

So so I think from that perspective, we have seen new buyers emerging in China and India. They will have to keep on buying more and more of Russian crude. And the discounts which Russian crude is offering at around more than $40 per barrel versus Brent is facilitating that movement. Now the next, you know, impact which we could see will emerge from the product ban and the product price gap, which came in effect in our fifth of February this year. Now, what that means is Russia will also have to find. Let me just jump in here for a second as well, because as all of this plays out, of course, geopolitics is front and center, particularly when it comes to Russian supply. What about the United States? Is the administration getting it right when it comes to the SPR buybacks? Well, you know, at some point, the SPR stocks in US are, you know, historically low.

So you know, at some point, they will have to, you know, fill up those those reserves and that could provide some support to the overall crude demand in the market. But at what price level that's that's the key thing, you know, price $84, $85 barrel. And we think the prices will appreciate as moving to the year. So whether that's the right price level to buy, I think that's a big question.

Capital Connection, CNBC