Oil prices could top $100 next year thanks to Russia's struggle to find buyers and China's reopening, a UBS analyst says

• Oil could top $100 a barrel in 2023 as the Russia embargo bites and China reopens, a UBS analyst said.
• An EU price cap on Russian oil will make it harder for it to sell crude, hurting output, an analyst said.

Oil prices could top $100 a barrel next year as Russia lowers crude production and as demand from China bounces back, according to a UBS analyst.

While Russia's oil output is holding up, the European Union ban on its seaborne crude exports will eventually be a drag, Giovanni Staunovo told CNBC on Monday.

That, combined with a return of demand as Beijing eases COVID-zero rules, means crude prices are likely to rise above $100 a barrel in 2023, the UBS Global Wealth Management commodity analyst said.

"At the end of the day, I still believe that the European embargo will translate into lower Russian production, potentially also with the February 5 deadline on refined products," Staunovo said, referring to the coming EU ban on oil products such as diesel.

"Essentially, I guess it will be more difficult for Russia to find a market for all these barrels and that means lower Russian production," he added.

The EU's ban on all seaborne Russian oil imports came into effect last Monday, with the fuel embargo to follow in February, in a move to crimp Moscow's revenue to fund its war on Ukraine. It came in alongside a G7 measure that means cargoes of Russian oil delivered anywhere in the world will be denied EU insurance and shipping services.

That's likely to make it harder for Russia to sell its crude elsewhere, despite strong sales to India and China on the back of big price discounts. In addition, President Vladimir Putin has said Moscow could cut output in response to the price cap, set at $60 a barrel.

Overall, Moscow could struggle to find buyers to fill the gap left by one of its biggest markets, Europe. With lower demand for its oil comes lower production, which could drive up crude prices.

Brent crude futures, the international benchmark, have fallen over 17% in the past three months thanks to growing worries about a recession. Strict COVID-19 lockdowns in China, the world's second-biggest economy, have also weighed.

The UBS analyst pointed out that Beijing's moves to lift restrictions to curb the spread of COVID-19 could fuel demand, which in turn could send prices higher.

"At the same time, we look out for an easing of COVID-19 policy, which should also translate into higher demand. Here, clearly the focus needs to be on emerging Asia, accounting for 75% of oil demand growth next year," Staunovo said.