Global Oil Prices Remain Volatile

Oil prices fell at the beginning of this week. On December 11, West Texas Intermediate oil (WTI) fell 11.20 percent, Brent fell 11.07 percent and Mexican mix fell 13.54 percent, the lowest price for the latter since April. While Mexican oil reached its highest price on March 8, 2022, at US$119.62/b, by December 9 this price plummeted to US$60.42/b, about US$8 below what has been calculated for the 2023 federal budget.

Oil prices have been gradually descending after their peak during the Russia-Ukraine war. Last week, Russia announced a cut to its production due to international sanctions and restrictions that sought to put pressure on the country. While this slightly increased the price of oil, China’s COVID-19 lockdown measures kept dragging the cost down. Despite the lift of some Chinese restrictions and potentially higher demand during winter, the downward trend persisted since indications of a  recession kept oil futures volatile. The oil leak at Keystone and further closure of the pipeline also influenced slight and brief increases this week. The delay of oil ships in the Black Sea limited further lowered prices.

As reported by El Economista, the past week was especially volatile: Oil prices reached a high of US$82.72/b, while the minimum was US$70.08/b, a volatility not seen since December 2021. The International Energy Agency (IEA) reported that it does not rule out a possible spike in oil prices for 2023.

On Dec. 14, 2022, oil prices experienced a hike once again. WTI oil reached US$76.8/b when on December 9 it stood at US$71.02/b. Brent crude oil rose to $81.99/b from US$76.1/b on December 9th. According to Reuters, there are concerns about oversupply and subsidizing, since Brent oil is traded on a market structure where front-month contracted barrels trade higher than later deliveries. OPEC also said that it expects demand to grow 2.25MMb/d in 2023.

US President Joe Biden planned to increase national reserves with oil prices at US$70/b. On the week of December 9, US reserves rose by 7.8MMb. However, as reported by Reuters, there is a projection of a drop of 3.6MMb and more data is still expected from the US Department of Energy. The oil market remains expectant of the country’s policies on reserves and rates.

Following the slowdown of the economy, inflation was lower than expected over the past two consecutive months. According to analysts, the decrease in inflation will be slower in Mexico than in the US due to the efficiency of the latter country’s markets, as well as Mexico’s subsidy structures.