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JP Morgan sees OPEC spare capacity fall through 2022

Saturday, 15 January 2022 | 01:00

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.
Source: Reuters

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