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JP Morgan Sees OPEC Spare Capacity Falling Through 2022 – Oil Prices Rising Sharply


These translations are done via Google Translate

January 12, 2022

JP Morgan on Wednesday said it expects Organization of Petroleum Exporting Countries’ spare capacity to fall through 2022, driving a higher risk premium to oil prices.

JPM forecasts oil prices to rise as high as $125 a barrel this year and $150 a barrel in 2023. “We see growing market recognition of global underinvestment in supply,” the bank said.

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Oil prices hit two-month highs on Wednesday on tight supply as crude inventories in the United States, the world’s top consumer, fell to their lowest since 2018. A weaker dollar and easing concerns about the Omicron coronavirus variant were also factors.

Assuming production at prevailing quotas, OPEC spare capacity will fall to 4% of total production capacity by fourth quarter 2022, from 13% in the third quarter 2021, the U.S. investment bank said in a note.

JPM said this comes at a critical point as other global producers falter. The combination of underinvestment within OPEC+ nations and post-pandemic rising oil demand could lead to a potential energy crisis.

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