Shafaq News/ JPMorgan analyst Christyan Malek has raised concerns about the recent surge in oil prices, predicting that Brent crude prices could potentially reach $150 a barrel by 2026. This projection has led JPMorgan to upgrade the entire global energy sector to an overweight rating.
Malek’s forecast is based on several factors, including capacity shocks in the near to medium term, an energy supercycle, and an ongoing transition away from hydrocarbons. The recent increase in oil prices can be attributed to production cuts from OPEC and Russia, along with higher demand. However, this trend has sparked inflationary concerns and raised the possibility of sustained high interest rates.
In August, there was a notable 0.6% month-over-month increase in consumer prices, primarily driven by rising energy prices. On Friday, Brent prices rose by 1% to trade around $94 a barrel following a fuel export ban from Russia that intensified global supply fears.
According to Malek, Brent prices are expected to range between $90 and $110 in 2024, and between $100 and $120 in 2025. However, JPMorgan still anticipates Brent to stabilize at around $80 per barrel over the long run, although there is a risk that long-term prices could settle at approximately $100 a barrel.
JPMorgan projects a global supply/demand imbalance of 1.1 million barrels per day deficit in 2025, which is expected to widen to 7.1 million barrels per day in 2030. This scenario is driven by a strong demand outlook and limited supply sources.
Investors should prepare for a very volatile supercycle, Malek warned during an interview with Bloomberg on Friday. He explained that the decrease in investment in new oil production, combined with production cuts from OPEC and other top oil producers, will push crude prices higher for years to come.
Despite concerns of a potential U.S. and European recession, which would typically lead to declining oil prices due to fading consumer demand, crude oil prices have surged in 2023 due to the lack of new oil production and production cuts from the world’s major producers.
In light of this looming energy supercycle, JPMorgan has expressed a positive outlook for global energy producers. It highlights Shell, Baker Hughes, and Exxon Mobil as some of its top recommendations.
As the energy sector braces itself for a volatile future, analysts and market participants will closely monitor oil prices and their impact on global economies. The potential for Brent crude prices to reach $150 a barrel by 2026 puts the industry on alert, while countries and companies continue to navigate the ongoing shift away from traditional hydrocarbon-based energy sources.
