JP Morgan believes oil prices could rise to $100 a barrel before the presidential election in the United States in November, reports CNBC.
The background is that the Kremlin has now ordered all Russian oil companies to reduce production into the second quarter.
“The shift in Russia’s oil strategy is surprising,” writes Natasha Kaneva, head of global commodities strategy at JP Morgan, in a recent report, according to CNBC.
According to the website, Kaneva points out that Russia’s cuts could push the Brent price up to 90 dollars in April, and close to 100 dollars a barrel by September. It will put more pressure on the Biden administration in the run-up to the presidential election in November.
Can extend cuts
JP Morgan originally predicted that Russia and Saudi Arabia would begin to phase out some of their production cuts in April, for a combined increase of 400,000 barrels per day. day. But Russia earlier this month promised a cut of 471,000 barrels per day. day through the second quarter, and has now again confirmed this.
Russia itself claims that the cuts are in line with a seasonal peak in refinery maintenance. However, several of the country’s largest refineries have been knocked out by Ukrainian drone attacks recently.
The cuts are part of Russia’s commitment to Opec+, which will reduce oil production by a total of 2.2 million barrels per year. day through the second quarter.
“The increase in oil prices may be further strengthened by the possibility that the Opec+ alliance in June may extend its production cuts until the end of the year”, writes Kaneva, according to CNBC.
Strategic reserves
The analyst points out, however, that the investment bank’s expectations of increased oil prices assume that supply, demand and US policy do not react to Russia’s actions. The White House can make use of its strategic petroleum reserve with the possibility of releasing up to 60 million barrels, which will put a damper on any price increase.
According to JP Morgan, the US will probably release 500,000 barrels per month for four months.
The investment bank also points out that even in the absence of a change in US policy, Brent prices above USD 90 a barrel are likely to reduce demand, given that the dollar is strong and borrowing costs are high. Weaker demand will in turn result in lower crude oil prices.
