The group of oil producing countries stopped talking on Monday.
Ramzi Boudina.
The price of oil will go up to $150 a barrel in 2023, according to a Monday note.
"We believe that the oil price will be defended by volume growth, keeping inventories low", said JP Morgan.
The bank doesn't think the new Omicron variant of COVID-19 will affect demand for oil.
According to the bank, rising oil prices are here to stay and could hit $150/bl in 2023 as the OPEC+ cartel control supply and defend higher prices.
The Biden administration's release of strategic petroleum reserves will have little impact on the underlying price of oil, as was made clear in the initial price reaction in oil last week.
Oil prices are driven by supply and demand. While the Omicron COVID-19 variant put a dent into oil prices on Friday, with investors fearing that potential country lock-ups would reduce travel and therefore lower demand for oil, JP Morgan viewed that price move as an overreaction.
"We believe the market may underestimate the impact of the recent emergence of the Omicron variant of COVID-19 on oil prices during the US holiday period, even as the Omicron variant spreads," said the note.
With demand for oil likely to remain steady, supply will remain the key driver behind oil prices for years to come. With OPEC+ firmly in the driver's seat for oil prices, we think they will hit $120/bl in 2022, and could even overshoot to $150/bl in 2023, representing potential upside of as much as 100% from current levels.
"We believe that the oil price will be defended by volume growth, keeping inventories low, markets in balance, and well managed," the bank said.
Increased supply from US-based oil producers could help put downward pressure on oil prices, but the US oil rig count is about half what it was in 2019, and investments into the sector have been slow ever since oil prices briefly turned negative in 2020. It's a recipe for rising oil prices until US oil production is back to normal.
Business Insider has an original article.
