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Oil Prices Could Hit $125 On Supply Snarls, Warns JP Morgan

International Energy Agency reported the gap between the OPEC+ group’s production target and actual output was 900,000 barrels a day

Crude oil
Beginning in August 2021, several Covid-19 outbreaks in China led to mobility restrictions, which in turn reduced domestic demand for petroleum products. Photo: Reuters


Shortfalls in OPEC+ production and spare capacity concerns are likely to keep the oil market tight and prices could hit $125 per barrel as early as the second quarter of this year, JP Morgan Global Equity Research has warned.

“The supply undershoot is set to rise through 2022 as OPEC+ unlikely to deviate from targeted quota increases – driving a higher risk premium of more than $30 per barrel to oil prices,” the bank said in a note on Friday.

Brent crude on Monday was trading at around $94.55 a barrel while US West Texas Intermediate (WTI) crude was at $93.19 a barrel at around 1107 GMT amid escalating Ukraine-Russia tensions.


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The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, has raised its monthly output target by 400,000 barrels per day recently but has repeatedly failed to reach that figure.

Some participating countries are struggling to ramp up output following years of under-investment. 

The International Energy Agency in its last monthly report said the gap between the OPEC+ target and actual output in January had widened to 900,000 barrels per day. 

“This underperformance comes at a critical juncture – and in our view, as other global producers falter, the combination of underinvestment within OPEC+ nations and post-pandemic rising oil demand will dovetail to a potential point of energy crisis,” JP Morgan said.

“In addition, we note a muted supply response by non-OPEC producers to higher prices – led by a greater focus on transition/cash return – could add a further $10/bbl premium,” the analysts added.


  • Reuters with additional editing by Sean O’Meara


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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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