The bank boosted its 2011 Brent crude forecast to $120 a barrel from $110, and changed its estimate for West Texas Intermediate WTI crude to $109.50 from $99. Forecasts for 2012 prices were raised to $120 and $114, respectively.
While financial bushfires or perhaps a rapid resolution to the Libyan civil war could radically alter market dynamics, the balance of both risks and fundamentals still points to a supply-constrained world,” JPMorgan analysts led by New York- based Lawrence Eagles wrote in a report yesterday.
Oil futures posted their biggest weekly decline since December 2008 last week amid concern about the pace of the economic recovery, with London-traded Brent plunging 13 percent to $109.13.
JPMorgan forecasts supply to fall short of demand by 600,000 barrels a day during the third quarter, even with the assumption that the Organization of Petroleum Exporting Countries increases output by 1.2 million barrels a day in coming months.
The gap could narrow to 300,000 barrels a day by the fourth quarter, assuming Saudi Arabia increases production to 9.5 million barrels a day, Angola to 1.7 million and Iraq to 3 million, though “that may prove a stretch,” the bank said. Output from those three OPEC countries in March was 8.66 million, 1.56 million and 2.69 million barrels a day, respectively, it said.
Supply Gap
Consumers draw on stockpiles when production fails to match demand. Still, “with inventories already below the five-year average, any supply gap will have to be balanced by lower demand growth, rationed by higher prices,” the New York-based bank said.
Next quarter there’s a risk oil may move toward record levels near $150 set in 2008, unless there’s a surprise increase in OPEC output beyond 29.4 million barrels a day or slower economic growth, the bank said. JPMorgan forecast Brent to average $130 and WTI $116 during the July-to-September period.
While the bank lowered its estimate of world demand by 100,000 barrels a day, in part because of the earthquake-led disruptions in Japan, it raised its forecast for Chinese consumption, saying data implies China’s crude-oil inventories have been “drawn heavily” in the past six months. “We have observed a parallel destocking activity in the copper market,” JPMorgan said. JPMorgan analysts Oil prices, Crude Oil Preice forecast 2011, crude oil prediction 2011, 2011 Brent crude forecast, For the latest updates PRESS CTR + D or visit Stock Market news Today
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