JPMorgan Sees Oil Rising Back Over $100 If These Five Conditions Are Met…

Fight Censorship, Share This Post!

JPMorgan Sees Oil Rising Back Over $100 If These Five Conditions Are Met…

The OPEC+ meeting has come and gone, with “Fist-bump bro” Biden humiliated…

… and the White House scrambling to save at least a little face…

… and failing.

And so, with oil surging – even as the dollar spikes sharply higher – traders are asking two questions: i) is the drop in oil over and ii) how much higher can it get.

Here are the answers: i) with just a few more weeks left on Biden’s SPR drain mandate, which has soaked up a record 30% of all the “emergency” oil inventory this year…

… and with even less supply coming to market now, Europe about to go turbo on gas to oil switching, and China set to rebound post this month’s congress when Covid Zero will be gradually phased out, we can decisively say that the drop in oil is over.

As for ii), we go to the head of JPM commodity strategy, Natasha Kaneva, who repeats her long-standing 4Q22 price target of $100/bbl, and says that to realize it, five key forecasted conditions need to play out:

  1. demand needs to bounce 0.9 mbd yoy in 4Q, most of that from gas to oil substitution;
  2. sanctions on Russia need to constrain supply by 600 kbd;
  3. Saudi Arabia production needs to normalize from 11 mbd in September to a sustainable 10.6-10.7 mbd pace;
  4. US SPR releases need to end in October or sooner; and
  5. the US dollar needs to stabilize.

Kaneva concludes that if four of the above supply-demand conditions materialize, the bank’s models suggest a return to deficits in 4Q22 as supply declines (lower Russian and Saudi production and the end of SPR releases) and demand is supported by incremental gas to oil switching. Adding a stable US dollar to the deficit should result in prices once again re-testing $100 later in the quarter, according to JPMorgan.

More in the full note available to pro subs.

Tyler Durden
Wed, 10/05/2022 – 11:40


This post has been republished with implied permission from a publicly-available RSS feed found on Zero Hedge. The views expressed by the original author(s) do not necessarily reflect the opinions or views of The Libertarian Hub, its owners or administrators. Any images included in the original article belong to and are the sole responsibility of the original author/website. The Libertarian Hub makes no claims of ownership of any imported photos/images and shall not be held liable for any unintended copyright infringement. Submit a DCMA takedown request.


Fight Censorship, Share This Post!

-> Click Here to Read the Original Article <-

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.