Oil prices will average $100 a barrel next year as demand rebounds in China and falling Russian output keeps global supplies tight, Bank of America says

Bank of America predicts that the price of oil will average $100 a barrel in the next five years.

Beijing has capped oil use in the world's second largest economy throughout the year, but analysts expect that to change as the year progresses.

"On the global oil demand side, we now forecast that the Asian region will deliver 86% of the 1.7 million b/d of oil consumption growth that we project for next year, compared to just 19% of the 2 million b/d that we expect for 2022," BofA strategists said

Lower expectations of economic growth in the US, Europe, and Asia have caused oil demand to fall to 2 million barrels per day. In 2021, there was a recovery of over 6 million barrels per day.

BofA Global Research

BofA expects oil demand to grow at an average of 1.7 million barrels per day over the course of the next five years.

The threat of a global recession could cause prices to be lower than the $100 average, but a Russian oil price cap could cause some upside. If more barrels from Russia are removed from the global market, prices could go up.

BofA analysts said that there could be output disruptions in Iraq, Nigeria, and Libya.

Global oil inventories are limited and spare production capacity is low, according to the firm.

According to BofA, a small surplus of 0.1 million b/d will be created next year. We expect some gas-to-oil switch to lend support toBrent oil and we continue to forecast an average price of $100/bbl in 2023, with a 12 month target of $110/bbl.

Dollar headwinds

According to Bank of America, the US dollar could still climb further to new records if the economy goes through a hard landing.

BofA said that a strong dollar has been a big factor in the price of oil.

BofA Global Research

The dollar's rally against rival currencies, notably, has made fuel more expensive for other nations to purchase in local currencies. That strength contributed to the dramatic slowdown of oil demand growth, though some of it also stemmed from the spike in global energy prices, according to Bank of America.