The oil price has been falling hard.
Brent crude oil is currently trading for US$77.45 per barrel. That's down from US$86.18 per barrel on 6 March and the lowest price in more than three months.
It's a similar story for West Texas Intermediate crude, currently going for US$71.91. On 6 March that same barrel was trading for US$80.46.
As you'd expect, that's put some pressure on S&P/ASX 200 Index (ASX: XJO) oil and gas stocks like Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS).
Since 6 March the Santos share price is down 1% while Woodside shares have tumbled a painful 12%.
So, what's going on with the oil price?
Bank failures and excess supply
The oil price is facing a few headwinds lately.
First, crude supplies in the US and much of the world appear to be more than sufficient to meet immediate demand, with the Organization of the Petroleum Exporting Countries (OPEC) forecasting a moderate surplus in the next quarter.
Second, the demand side strength for oil is in question as investors mull a possible US recession. Those fears were stoked by last week's collapse of Silicon Valley Bank, reportedly the eighth-biggest bank in the US.
Those fears look to have trumped the nascent optimism of a potential surge in energy demand based on China's reopening.
Commenting on the big pullback in the oil price, Ed Moya, a senior market analyst at Oanda said (quoted by Bloomberg), "Energy traders can't find a reason to buy this dip until we get past the next round of inventory data. Rising stockpiles are expected and that could keep oil vulnerable over the next 24 hours."
"If buyers don't show up soon and support oil at US$70, we can see an air pocket lower to US$62," Jc O'Hara, the chief technical strategist at Roth Mkm added.
That's the shorter-term outlook for you.
But what can ASX 200 investors expect from the oil price for the rest of 2023?
What's the forecast for the oil price in 2023?
For some insight into that million-dollar question, we defer to CBA mining and energy analyst Vivek Dhar.
According to Dhar (courtesy of The Australian Financial Review), "We see upside risks to our outlook driven by a sustained fall in Russia's oil and diesel exports."
Dhar also doesn't expect the currently ample supply situation to last, putting upward pressure on the oil price.
"We see deficit risks rising in H2 2023, as global oil supply growth, driven mainly by US, Norway and Brazil, fails to keep up with global oil demand growth," he said.
With Dhar forecasting an uptick in oil demand from India and China, the world's two most populous nations, he forecasts Brent oil futures will increase from $US82 per barrel in the first half of 2023 to $US88 per barrel in the second half.
That would put the oil price up some 14% in the second half of 2023 compared to today's prices. Which would certainly be welcome news to Santos and Woodside shareholders.
