International Oil Prices Super Cycle: Is $150 per Barrel in Sight?

Following the recent outlook of oil prices reaching $100 per barrel among investment banks, JP Morgan Chase, the largest bank in the United States, has offered an even more pessimistic projection. The bank has raised concerns, suggesting the possibility of international oil prices surging up to $150.

 

JP Morgan anticipates that the Federal Reserve is likely to maintain high interest rates for an extended period. Consequently, they predict that energy companies may reduce investments in oil and gas exploration and production if high-interest rates persist.

 

Amid worries of a supply shortage in the oil market due to Russia's restriction on diesel oil exports, JP Morgan has predicted further price increases under these circumstances.

 

According to CNBC, JP Morgan analyst Christian Malek believes that the upward trajectory of oil prices will not stop at $100 and that the oil market is currently facing supply shock in the short and medium terms. Malek pessimistically forecasts that if the energy market enters a "super cycle" due to these supply shocks, the benchmark Brent crude oil price could potentially reach a maximum of $150 per barrel. A super cycle in oil prices indicates a tendency for further price increases.

 

International oil prices have recently seen an uptick due to Russia's limitations on diesel exports, and although there have been temporary declines in response to concerns over additional U.S. interest rate hikes, JP Morgan notes that Brent crude oil prices have resumed their upward trend.

 

JP Morgan anticipates that the Federal Reserve is likely to maintain high interest rates for an extended period. Consequently, they predict that energy companies may reduce investments in oil and gas exploration and production if high-interest rates persist. This reduction in supply could lead to further increases in oil prices.

 

Malek also expects a push towards renewable energy due to decarbonization policies and institutional investors' carbon-neutral initiatives. These factors are expected to combine and further intensify pressure on the energy market, making a rise in oil prices inevitable.

 

Considering the current trend, Malek foresees Brent crude oil trading at around $90-$110 per barrel next year and reaching levels of $100-$120 per barrel by 2025. He even predicts that by 2026, it could finally reach $150 per barrel.

 

However, Malek believes the likelihood of oil prices above $100 being sustained in the long term is low, and after reaching $150, he anticipates a drop to around $80 per barrel. Nevertheless, he adds a caveat that the possibility of sustained prices above $100 cannot be ruled out.

 

Malek's analysis suggests that under the current trajectory, the global oil supply-demand imbalance will lead to a daily shortage of 1.1 million barrels by 2025. However, with reduced investment in oil exploration and production amid carbon neutrality efforts and continued high-interest rates, the scale of the supply shortage is expected to expand to 7.1 million barrels per day by 2030. This long-term supply imbalance and reduced production capacity from OPEC+ could result in a premium of $20 per barrel.