JP Morgan sees OPEC spare capacity falling through 2022

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The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured on the wall of the new OPEC headquarters in Vienna March 16, 2010. REUTERS/Heinz-Peter Bader

Jan 12 (Reuters) – JP Morgan said on Wednesday it expects spare capacity at the Organization of the Petroleum Exporting Countries to decline through 2022, driving a higher risk premium on oil prices .

JPM forecasts oil prices to rise to $125 a barrel this year and $150 a barrel in 2023. “We are seeing growing market recognition of global underinvestment in supply,” the bank said.

Oil prices hit two-month highs on Wednesday on tight supply as crude inventories in the United States, the world’s largest consumer, fell to their lowest since 2018. A weaker dollar and the Alleviation of concerns over the Omicron variant of the coronavirus were also factors.

Assuming production at prevailing quotas, OPEC spare capacity will fall to 4% of total production capacity by the fourth quarter of 2022, from 13% in the third quarter of 2021, the US investment bank said. in a note.

JPM said it comes at a critical time as other global producers falter. The combination of underinvestment within OPEC+ countries and growing demand for oil post-pandemic could lead to a potential energy crisis.

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Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Cynthia Osterman

Our Standards: Thomson Reuters Trust Principles.

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