Despite the prevailing downtrend in the prices of oil and gas in the export market, investment bank Goldman Sachs insists that 2023 will be a rewarding period for exporters who would have capacity to respond to strong demand from recovering economies of the world.

The company projects that benchmark as prices would average $110 per barrel next year, agency sources reported.

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The Oracle Today reports that oil prices recovered somewhat at the opening of the week as investors await final details of the G7 nations’ price ceiling on Russian from December 5.

There were also concerns on the impact of ongoing protests in China over government efforts to halt the spread of COVID-19 amid record case counts.

Brent crude was down 0.18 per cent to US$83.45 as at 1:09 p.m. ET on Monday, largely erasing 2022 gains fuelled by Russia’s war in Ukraine.

Meanwhile, U.S. benchmark West Texas Intermediate gained 1.25 per cent to US$77.23 per barrel, after trading near its lowest level of the year.

Goldman Sachs predicts a strong U.S. dollar and weaker demand expectations will remain a “powerful headwind to prices.” However, the bank says the supply situation will “inevitably” require “much higher prices,” due to lack of investment in the industry, as well as low spare capacity and inventories.

“We are tactically cautious, structurally bullish,” Goldman Sachs strategists wrote in a wide-ranging outlook for next year. “We reiterate our bullish price view, and expect Brent crude oil prices to average US$110 per barrel in 2023.”

Goldman Sachs says seasonal demand from heating is likely to pick up as temperatures drop during the winter months. The strategists also note the impact of so-called gas-to-oil switching, where certain utilities and industrial consumers swap more expensive natural gas for refined oil products like diesel or gasoline.

“At the same time, we believe the EU embargo on Russian oil will demand an unachievable redirection of flows, causing Russian production to fall by 0.6 million barrels per day, at the same time as OPEC+ has agreed to an effective cut of 1.2 million barrels per day,” the strategists wrote.

They add that it would also take a “hard landing” for the U.S. economy to justify sustained lower prices.

Goldman Sachs’ structural bullishness echoes comments from RBC Capital Markets in June.

“The supply-side shock absorbers have been removed from the market,” analyst Micheal Tran wrote in a note to clients.

Tran described the oil market at the time as caught between “the strongest fundamental oil market set up in decades, maybe ever,” and a deteriorating macroeconomic backdrop threatening the outlook for demand.