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Oil expected to return to high $80s in September, JPMorgan analysts say
Petroleum recent setback It’s likely temporary, as an increase in demand in the coming months will cause prices to rise, JPMorgan analysts say.
On Thursday, West Texas Intermediate (CL=F) futures rose 2% to rise above $75 per barrel, while Brent (BZ=F), the international reference price, increased by almost 2%, trading just below 80 dollars per barrel.
The recovery follows a sharp sell-off earlier this week after oil alliance OPEC+ announced it would keep most of its reductions in place until 2025 but would begin a gradual rollback of its voluntary cuts in October.
“Summer stock draws should be enough to put Brent back into the $80-$90 range by September,” wrote Natasha Kaneva, head of global commodities strategy at JPMorgan, in a note on Thursday.
Markets predicted that OPEC+ reductions would continue through the fourth quarter of this year.
Saudi Arabia’s oil minister said price stability is still the goal of the oil alliance and suggested that the progressive elimination of voluntary cuts later this year could be changed.
While the addition of barrels to the market could be bearish for prices, JPMorgan analysts noted that several major OPEC producers are already producing well above their allocated quotas and that demand growth remains healthy.
“We expect a seasonal increase in demand to begin soon and project product and oil demand to increase by 2.5 mbd [million barrels per day] and 4.0 mbd, respectively, between April and August,” Kaneva wrote.
The analyst said additional demand could potentially come from Chinese buyers as the country takes advantage of lower prices to increase its strategic and commercial oil reserves.
H&P Rig 488 oil rig and pump in Stanton, Texas, on June 8, 2023. (SUZANNE CORDEIRO/AFP via Getty Images) (SUZANNE CORDEIRO via Getty Images)
Next year, oil prices could fall as non-OPEC+ supply increases and demand slows, according to Kaneva and her team.
“Global oil demand growth will likely slow from 1.4 mbd this year to 1 mbd in 2025, as the last phase of the post-pandemic recovery dissipates and the advance of energy efficiency and a fleet of electric vehicles in expansion gains ground,” said Kaneva.
“Our price outlook sees Brent averaging $75 in 2025, down sharply from $83 in 2024, with year-end prices at $64,” she added.
Oil futures peaked in April when WTI closed above $86 per barrel while Brent surpassed $91 per barrel.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X at @ines_ferre.
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