OPEC Investing.com – US banking giant JPMorgan has said they expect oil to overshoot to $125/barrel next year and $150/barrel in 2023, citing lower than expected OPEC spare capacity.
JPM said it estimates ‘true’ OPEC spare capacity next year to be around 2 million barrels per day (BPD) below consensus estimates of 4.8 million bpd.
The bank said it believes a 3-month pause to the OPEC+ plan of increasing production by 400,000 bpd in monthly increments will be required in the first half of next year to balance the market, however, the bank then believes OPEC+ will struggle to deliver monthly growth of over 250,000bpd once reinstated.
JPM argues that the group’s ability to control prices depends on the efficacy of its spare capacity, which at prevailing quotas is set to fall to a 25-year low of just 4% of total capacity, from an average of 14% between 1995 and 2020.
“We see LT (long-term) $80/barrel Brent (real) as the marginal cost to deliver a balanced market in 2024+,” JPM analysts said in the research note. “Incorporating our model of OPEC+ true capacity, we expect oil to overshoot to $125/barrel in 2022 and $150/barrel in 2023.