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.
“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.
Don’t miss our Cyber Monday 24-hour sale: Sign up for our Action Alerts PLUS investment club and get trading strategies and investing ideas from Real Money’s expert contributors for free.