Uncertainty sets the tone for the oil markets in 2023
In Wood Mackenzie’s latest economic outlook, we expect some key economies to enter recession and the global economy to slump in 2023, before recovering in 2024. Global GDP is set for its weakest global expansion, outside of the pandemic and global financial crisis contractions, since 2001.
On the supply side, the key risk remains with Russia. However, early indications are that the EU crude ban is having minimal direct impact on Russian crude export volumes.
Wood Mackenzie expect the refining sector tightness to ease in the year ahead. Over 1.4 million b/d of additional refining capacity is scheduled to become fully operational over the course of 2023. This will enable crude runs to increase to satisfy diesel/gas oil demand, easing the pressure the sector is currently facing.
Wood Mackenzie forecast is for refining margins to remain elevated during the first half of 2023 before declining. There are, however, several uncertainties that could disrupt this outlook, beyond the typical challenges of project completion and commissioning. This includes China’s product export policies, and the EU refined product import ban from Russia to be implemented in February.
Refinery-petrochemical integration has been the downstream trend to watch for some time. However, 2022 saw a marked reversal of its benefits. Steam cracker and aromatic margins collapsed from the middle of the year as the petrochemical industry destocked on the fear of recession. The record refining margins supported crude runs at the integrated sites, pushing chemical co-products into a weak market environment.
The 2023 outlook remains challenging for chemicals. But will there still be value uplift from petrochemical integration? Read the full report to find out more. Plus, get our view on how the global refining industry is adapting its investment strategy to the energy transition.
