Oil prices will hover near $90 in 2023 as Russian production bounces back to pre-war levels, JPMorgan says

According to a Monday note, oil prices will go up, but not as much as previously thought.

The bank lowered its forecast for the price of oil due to the fact that Russia will increase production. The upside potential for next year is just 8% because of the current price of oil.

Russia will likely find a buyer in India if its oil production levels return to normal. As long as it doesn't use Western insurance, finance, and tanker, the US is happy for India to buy as much Russian oil as it wants.

Oil prices should be supported by the Biden administration's need to refill the US strategic petroleum reserve. The Biden administration sought to ease inflationary pressures from high oil prices by decreasing the amount of oil in the reserve.

The first half of next year is the optimal time for the US administration to replenish oil SPR inventories, according to JP Morgan. Concerns about economic demand push the price of oil down.

Even with a potential slow-down in the global economy, there should be solid oil demand because of the continued normalization of services from the COVID-19 epidemic, according to JP Morgan. If China finally emerges from its COVID lockdown policies, that is likely to be the case.

Despite the decline in road activity in Asia, global traffic has returned to its previous levels. While North American road traffic has remained flattish, European road traffic has climbed back to above 2019. Global flights have not changed much for most of the year.

The oil markets are likely to be balanced next year, according to JP Morgan. It's possible that slight oil production cuts from the Organization of the Petroleum Exporting Countries will help prop up oil prices next year.

According to the note, there are a number of factors that put the forecast at risk.

There is a chance of a settlement between Russia and Ukraine. Oil prices would go back to pre-war levels if there was a ceasefire or peace agreement.

The timing of a potential China reopening is one of the risks to the forecast. Depending on the timing and magnitude of both factors, oil prices could go up or down.

Even in the event of a global recession, the capital discipline shown by most oil producers will keep oil prices from falling by more than 15 per barrel.