Oil prices may go beyond $100/bbl, says JP Morgan

Oil&Gas Materials 22 February 2022 12:10 (UTC +04:00)
Oil prices may go beyond $100/bbl, says JP Morgan

BAKU, Azerbaijan, Feb.22

By Leman Zeynalova - Trend:

Oil prices may hit $120 per barrel amid the escalation of the geopolitical tensions in Europe, Trend reports with reference to the US JP Morgan Bank.

“For a second consecutive year, we continue to hold a constructive outlook on the sector on record or near-record demand outlooks and supply still struggling to deliver. Historic inventory tightness means there are few shock absorbers to cope with any unexpected interruption in output or stronger than anticipated growth in consumption, which could result in nonlinear price increases. Rising geopolitical tensions are further amplifying the case for commodities, given Russia's far-reaching impact on global commodity markets,” said the bank.

JP Morgan notes that oil provides the largest risk premium asymmetry: so tight is the oil market, that if there is a progress towards peaceful resolution, oil should stabilize around its fair value of $84-90/bbl, even with an Iran deal; or the confrontation will get much worse over the coming
weeks, with oil likely hitting $120/bbl.

Recent front-loaded monetary easing in China combined with an increased focus on infrastructure and grid spending skews the risk towards firmer Chinese metals demand growth this year, tightening the market even further, reads a report published by JP Morgan.

“A price premium associated with the geopolitical risk is already resonating through the European TTF natural gas forward curve, but warm European weather, strong wind generation and slack in the global LNG market have softened balances. With little change to the supply and demand fundamentals anticipated in the global natural gas market, we believe there is a sufficient inventory buffer for TTF prices to continue to slide lower over the European summer. In the event of further escalation, however, the risk around the approval of Nord Stream 2 pipeline project might lead to another spike in the TTF price premium ahead of the 2022/2023 winter season,” the report says.


Follow the author on Twitter: @Lyaman_Zeyn