Oil prices may hit $110 a barrel in 2023 but Russia risk could 'turbocharge' them even higher, BofA says

According to a note from Bank of America, there are a number of risks that could add to the pressure on prices in the near term.

The international oil benchmark averaged $101 per barrel this year, and BofA predicts an average of $100 and a peak of $110 at the height of the driving season. Analysts said that in the first quarter of the next year, the price of oil will be lower.

The high end of BofA's forecast is an increase of 28% because of the current price of oil.

The price cap on Russian crude is one of the upside risk factors for oil prices next year.

The cap was agreed to by European Union officials. There will be a ban on Russian oil imports into the EU on Monday. Analysts estimate that Russia's oil exports could fall by up to 1 million barrels per day because it won't sell oil to price-cap participants.

We put Russian total oil production levels at 10 million b/d in our assumptions, which is 10 million b/d higher than the IEA's figure. The BofA said that any deviation from the figures could cause oil prices to go up.

Russia has the largest upside risk to oil prices, according to analysts. The oil market could be put on notice by further supply disruptions.

A shortfall of 1 million barrels a day or more could come from a number of producers, with BofA estimating that every unexpected swing in supply or demand of 1 million barrels tends to move the price of oil.

"If production falls sharply, prices would have to rise as demand would need to adjust lower in the current context of limited spare capacity and inventories."

Positive factors in favor of oil next year include the reopening of the Chinese economy and gas-to-oil switch.

The average global recession has led to a decline in demand for 640,000 barrels per day.