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Oil Will Hit $125 a Barrel in 2022, $150 in 2023: JPMorgan

OPEC production shortfalls will spark the move, J.P. Morgan says. 'OPEC+ is not immune to the impacts of underinvestment.'
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Brent crude prices will reach $125 per barrel next year and $150 in 2023, as OPEC+ producers won’t be able to crank up production, J.P. Morgan analysts predict.

Brent recently traded at $72.96, up 0.33%. It has soared 41% year to date amid booming demand, with the global economy rebounding, and constricted supply.

“OPEC+ is not immune to the impacts of underinvestment…. We estimate 'true’ OPEC spare capacity in 2022 will be about 2 million barrels per day (43%) below consensus estimates of 4.8 million,” write the analysts led by Christyan Malek.

“While we believe a three-month pause to 400,000 barrel-per-day monthly increments is needed during the first half of 2022 to balance the market (and potentially a cut pending impact of new COVID variants), the group will struggle to deliver monthly growth of more than 250,000 barrels per day once reinstated.

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“Our bottom-up field-by-field model reveals a total capacity shortfall extending to 3 million barrels per day versus an OPEC+ target of 49.1 million barrels in the first half of 2024. This underperformance comes at a critical juncture, as other global producers falter.”

Last week, President Joe Biden announced the release of 50 million barrels of oil from the country’s strategic petroleum reserves stockpile in a move meant to quell rising gas prices at the pumps.

U.S. January crude futures dropped 13% from Wednesday through Friday, ending last week at $68.15 per barrel. But they rebounded 2% Monday to $69.60.

Oil stocks Exxon Mobil  (XOM) - Get Exxon Mobil Corporation Report and Chevron  (CVX) - Get Chevron Corporation Report each firmed less than 0.6% Monday.

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