Deloitte said energy prices are likely to be volatile in the first quarter of 2023 as geopolitical uncertainty continues. Global factors, including the war in Ukraine and the reopening from coronavirus in China, will continue to contribute to tensions between supply and demand, according to the company's energy, oil, and gas price forecasts released on Monday.

Who controls the price of crude oil?

After breaking the $100 mark for the first time in nearly a decade earlier in 2022, crude oil prices declined in the latter half of the year with rising interest rates, then briefly rose as China began moving away from its zero-COVID policy.

In the same context, in the first quarter of 2023, China’s reopening will remain a key focus as many questions remain unanswered about how the shift will impact global demand and whether it could cause a supply-demand crisis.

Other key factors for oil prices included OPEC Plus production cuts and moves to cap the price of Russian crude, which Deloitte says could lead to global supply disruptions, while natural gas prices were affected by regional weather forces and storage levels, particularly in Europe.

Also, global demand for oil and natural gas in North America is likely to raise prices and benefit Canadian energy companies. It added that the widening differentials between Canadian and American oil prices are also likely to continue into 2023.

Meanwhile, for natural gas, the big question will be how much is exported from the United States, and therefore how much Canadian production the US needs to meet domestic demand.

Although sudden gains from rising energy prices last year would typically prompt companies to increase their budgets and invest in bigger projects, companies are likely in 2023 to be determined to support their balance sheets and prepare themselves to continue navigating volatility amid ongoing geopolitical uncertainty and talks of a recession.

This means companies may focus more on pilot development and policies this year before making multi-billion-dollar investments in long-term projects.

Also, despite significant interest in long-term sustainable energy projects, energy companies will approach these investments cautiously, not only because of the economy but also because of uncertainty about government policies.