JP Morgan sees OPEC spare capacity fall through 2022
The Organization of the Petroleum Exporting Countries OPEC is pictured on the wall of the new OPEC headquarters in Vienna March 16, 2010. Jan 12 Reuters — JP Morgan said that spare capacity of the Organization of Petroleum Exporting Countries will fall through 2022, leading to a higher risk premium for oil prices.
JPM predicts that oil prices will go up as high as $125 a barrel this year and $150 a barrel in 2023. The bank said that there was growing market recognition of global underinvestment in supply.
On Wednesday, oil prices hit two-month highs on Wednesday as crude inventories in the United States fell to their lowest since 2018 and the United States’ top consumer fell to their lowest since 2018. A weaker dollar and the easing concerns about the Omicron coronavirus variant were also factors.
The US investment bank said that OPEC spare capacity would fall to 4% of total production capacity by the fourth quarter of 2022, from 13% in the third quarter of 2021.
JPM said this came at a critical point as other global producers are faltering. A potential energy crisis could be caused by the combination of underinvestment within OPEC nations and post-pandemic rising oil demand.