JP Morgan Explains Why Oil Prices Could Hit $100 This Year

WTI crude oil prices could surge to $100 per barrel in the coming year as there are diminished incentives for producers to boost production, according to a note from JP Morgan cited by Forexlive.

The investment bank estimates that the equilibrium price of WTI oil, the U.S. benchmark, is currently at around $70 per barrel.  

A $60 per barrel price for WTI Crude is too low to incentivize production, and this could potentially lead to a spike to $100 per barrel, according to the note carried by Forexlive.

Early on Thursday, WTI Crude prices were up by 0.7% at $83.45 per barrel, pushed up by a larger-than-expected U.S. crude inventory draw and increasing odds that the Fed would announce the first cut in interest rates in September.

After staying depressed at the beginning of this week due to concerns about China’s oil demand, oil prices rose on Wednesday morning following the EIA’s weekly inventory report, which showed an inventory draw of 4.9 million barrels of commercial crude stocks for the week to July 12.

This was largely in line with the estimates provided by the American Petroleum Institute, which reported on Tuesday an inventory draw of 4.44 million barrels for the week to July 12 in the throes of the high-demand season.

Crude oil inventories in the United States are now roughly 5% below the five-year average for this time of year.

Banks and analysts expect oil prices to be well supported in the $80s range in the third quarter amid the peak demand season in the northern hemisphere.  

ING, for example, forecasts Brent crude at $88 per barrel for the third quarter of 2024, dropping to $80 a barrel for the full year 2025. The key risk to this outlook is if the OPEC+ group decides to maintain the full extent of its cuts, which could prolong the market deficit into 2025.

By Tsvetana Paraskova for Oilprice.com

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