BAKU, Azerbaijan, Oct.5
By Leman Zeynalova – Trend:
The US JP Morgan Bank has boosted its year-end Brent crude oil price target to $84/bbl on gas-to-oil switching, Trend reports with reference to the Bank.
“Risk skewed towards on overshoot near-term given positioning, bullish sentiment and anticipatory risks of colder winter but oil fundamentals could ultimately disappoint the hype. After a decade of depressed prices, global gas prices are currently trading at 170 percent of oil prices on an energy contained basis, triggering a surge in interest to switch away from record-high natural gas in Europe and Asia to a marginally less expensive oil. In response to varying estimates of the amount of potential gas to oil switching, oil prices have been climbing higher, hitting our year-end target of $78/bbl, which already incorporated 200 kbd of additional fuel oil demand in Asia during the 2021/22 heating season,” the Bank said in its latest report.
Oil broke out from its narrow summer range, advancing briefly to above $80, reflecting that the surge in natural gas prices, which has seen the costs of both LNG and gas deliveries to European and Asian markets jump to records, is starting to have a knock-on effects on the oil market.
“After a period of depressed prices over the past decade given the abundance of supply, particularly in the US, global gas prices are currently trading at 170 percent of oil prices, triggering a surge in interest to switch away from record-high natural gas in Europe and Asia to a marginally less expensive oil. In response to varying estimates of the amount of gas to oil switching, oil prices have been climbing higher, hitting our year-end target of $78/bbl, which already incorporated 200 kbd of additional fuel oil demand in Asia during the 2021/22 heating season,” said JP Morgan.
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