01, Crude Oil Halved

As 2022 is about to draw to a close and 2023 is on the horizon, Standard Chartered, an international investment bank, has released its latest economic forecast for the coming year, highlighting several potential major surprises. However, some of these surprises, even if they were to occur, would not be unexpected, as there are already various signs pointing in that direction.

Regarding the trajectory of international crude oil prices for the next year, Standard Chartered believes that the recession signals from Western countries such as Europe and the United States are becoming increasingly apparent, leading to a continuous decline in demand for crude oil. Consequently, oil prices are expected to drop significantly in the future, with the possibility of Brent crude oil prices in London falling to $40 per barrel next year.

Nevertheless, Standard Chartered's report suggests that this would require a precondition: the resolution of conflicts in Europe by 2023. This would lead to the elimination of risk premiums in energy prices, resulting in a substantial decrease. However, as it stands, even if the conflicts in Europe remain unresolved, the price of crude oil is likely to continue adjusting downward, with the possibility of returning to $40 per barrel or lower.

02, Already on the Decline

In just the past three days, international crude oil prices have been on a continuous downward trend. The New York crude oil futures price hit a new low yesterday at $73.41 per barrel. The highest price three trading days prior was $83.34, marking a $10 decrease in just three days.

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A similar decline is also observed in the price of Brent crude oil. During yesterday's trading session, the lowest price for Brent crude reached $78.7, marking the first time this year that Brent crude has fallen below $80.

Twenty days ago, the price of Brent crude was as high as $99 per barrel, which has already seen a decrease of $20 per barrel.In fact, there are still many factors supporting the rise in crude oil prices during this period, but the price of crude oil continues to fall.

For example, the OPEC+ meeting decided to continue to reduce production in the future, maintaining the decision made in October to reduce production by 200 barrels per day, and there is no additional supply in the international crude oil market.

At the same time, the embargo and price limit on Russian oil by Europe and the United States have started on December 7, and it is estimated that the supply of Russian crude oil to the world will further decrease in the future.

But even so, the price of oil is still falling.

Now, even if the US dollar index continues to fall, it is difficult to support the rise in oil prices.

03, the big fall in the past

In fact, the same thing happened when the COVID-19 epidemic just broke out, but at that time it appeared in front of everyone in a more intense form.

When the epidemic just broke out, the market quickly realized that there will be a very big risk of economic recession in the future, and the expectation of demand for crude oil also decreased a lot, leading to a rapid decline in the price of crude oil.

At that time, the price of Brent crude oil was still as high as nearly 70 US dollars at the beginning of 2020, but it fell below 20 US dollars at the lowest point in April, creating the lowest record of 15.98 US dollars, and the price of New York crude oil even fell to the lowest of 6.5 US dollars.

So it is not a big surprise to infer that the price of oil next year may fall back to 40 US dollars.04, US Interest Rate Cuts

However, Standard Chartered Bank also pointed out that as the US economy falls into a deep recession, the wave of layoffs will spread to many industries, and the Federal Reserve will soon stop raising interest rates.

Subsequently, the Federal Reserve's monetary policy will shift, and by the end of next year, the US will cut interest rates by 200 basis points and halt its comprehensive tightening monetary policy.

The market is still debating whether the Federal Reserve will raise interest rates by 75 or 50 basis points in December. If such a reversal occurs next year, it would be unexpected, although it is within reason.

As for predicting a significant rise in Chinese assets, it is not surprising at all.

Now, the Chinese yuan has returned to within 7.0, and it is certain that the yuan will continue to appreciate next year, possibly returning to the level of 6.3 at the beginning of this year.

On the other hand, in the US stock market, Hong Kong stock market, or A-shares, the stock prices of Chinese-listed companies will show a noticeable increase, thanks to the continuous improvement of the economy and the constant growth of profits.

Moreover, as the pandemic slowly fades, consumption will recover strongly, which will also stimulate the economy to become even stronger.