We lower our average Brent oil price assumption for 2023F by 17% to USD75/bbl (-24% YoY). As of May 5, the YTD average Brent oil price was USD82/bbl — 9% lower than our previous 2023F of USD90/bbl. The average price is lower than the previous consensus expectation partly due to the EU’s cap on Russian oil being less severe than expected. In addition, China’s manufacturing purchasing managers’ index (PMI) hit a four-month low of 49.2 in April 2023, which raised concerns about China’s consumption as it was expected to be strong at the start of year when the country reopened. Furthermore, the US Federal Reserve has raised interest rates by 25 bps three times since the beginning of 2023, and the European Central Bank could continue to raise rates. As such, we lower our 2023 Brent oil price forecast. We note that the Energy Information Administration (EIA) expects a potentially smaller world oil surplus in H2 2023 vs H1, which should restrain further Brent oil price drops in H2. This expectation is driven by a further oil production cut by OPEC+ to 3.7 million barrels per day (bpd) — equivalent to ~4% of global demand in May 2023 vs January-April 2023 — and higher 2023 crude oil demand growth forecasts from the International Energy Agency (IEA), EIA and OPEC. These institutions increased their 2023 crude oil demand growth forecasts by 300,000 bpd on average in April 2023 vs their forecasts as of December 2022.

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