Oil collapses in the first days of 2023; Mexican mix falls 11.5%

Oil began 2023 with a drop of more than 9%, with the Mexican export mix losing 11.55%, given the concern that demand will weaken due to the global economic weakening and better-than-expected weather conditions.

The US benchmark West Texas Intermediate (WTI) is down 9.24% since the last day of last year, trading at $72.84 per barrel, while North Sea Brent is down 9.39% at $77.84.

For its part, the Mexican mix closed this Wednesday at 61.66 dollars per barrel compared to 69.71 dollars at which it ended 2022.

The three crudes are at their lowest level since the first week of December last year and are approaching the lows not seen since the end of 2021 that they touched at the beginning of last month.

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According to Ana Azuara, a Raw Materials analyst at Banco Base, concerns about the demand for energy due to the weak economy in the United States, Europe and China, as well as the expectation that crude oil production will increase in the Union Americana have been the main drag on the price of crude oil.

The US manufacturing sector contracted in December, falling for the second straight month, marking its weakest result since May 2020, according to data released on Wednesday by the Institute for Supply Management (ISM).

In addition, a preliminary Reuters poll on Monday showed that crude oil reserves in the United States likely increased by 2.2 million barrels. This Wednesday and Thursday crude oil inventory data will be published in the American Union.

Ana Azuara added that another of the factors that has put downward pressure on crude oil is “the possibility that the energy crisis will not spread further, because the weather conditions have been better or warmer than expected, especially in Europe.” ”.

On Wednesday, just the second day of trading in 2023, the Mexican mix fell 6.35%, in what was its worst intraday loss since July 2022. WTI was down 5.32%, while Bren was down 5.19%, both with their worst days in more than three months.

Jim Ritterbusch of Ritterbusch and Associates said the energy market is starting the new year on an “extremely weak” note and that Covid-19 cases in China were a major drag on oil prices on Wednesday.

The World Health Organization accused China of underestimating the real numbers of the Covid-19 pandemic in the country. Since December, the Asian nation has only recognized 25 cases nationwide, despite estimates that around a million people could die in the wave of cases currently plaguing the country.

Right now, everything indicates that the demand (in China) is slowing down and will continue to do so until they control the coronavirus and not through confinement but through vaccination,” said Ana Azuara.

Eli Rubin of EBW Analytics Group said that in the current context with demand not recovering and the Covid-19 situation in China “it’s hard to think of a bullish (oil) market.”

In 2022, crude oil managed to be one of the few assets that posted gains in the markets internationally.

Last year, the Mexican blend had an average price of $89.45 per barrel, a year-on-year increase of 37.86 percent.

Meanwhile, Brent had an average of 99.01 dollars and WTI of 94.41 dollars, an increase compared to 2021 of 39.59 and 38.67%, respectively.

It will be a difficult year

For 2023, the main upward risk for oil is the limited supply at the international level, in addition to the fact that the war between Russia and Ukraine will continue to be a factor that could again cause a rebound in the price of the raw material.

Ana Azuara said that if there is a significant rise in the year, WTI crude oil could approach levels of between 90-87 dollars per barrel, while the floor would be at 60-62 dollars.

“If the global recession scenarios are met and an improvement in economic activity is not seen during the year, in the case of WTI, it would close 2023 around 65/67 dollars per barrel, which would take Brent to levels of 68/70 and the mix 63/65 dollars”, he concluded.

(With information from Agencies)

sebastian.diaz@eleconomista.mx