JP Morgan Bullish on Oil and Energy -WSJ 12-09-2021

[Cliff_N]

JP Morgan Bullish on Oil and Energy -WSJ 12-09-2021
Postby Cliff_N » Fri Dec 09, 2022 3:07 pm

J.P. Morgan on Friday made a bullish case for oil prices and energy stocks in 2023, offering an analysis that points toward Brent crude finishing next year more than 20% above current levels.

Their views:

The global economy, pressured by recessions in the U.S. and Europe, will grow at a "sub-par" pace next year, but the world will still experience robust oil demand growth as China and other emerging markets put Covid constraints on their economies behind them.

Mobility fuels like gasoline, diesel and jet fuel will drive much of the demand increase, as consumption is currently running 2.7 million barrels per day below pre-Covid levels.

Global oil supply growth will also be strong. Russian production will be little impacted by the recently imposed G7 price cap, while countries including the U.S., Canada, Argentina, Brazil, Norway and Guyana will combine to boost global production by 1.6 million barrels per day.

To keep markets in balance, OPEC+ will cut at least 400,000 barrels per day from their current production quotas.

Supplies could be further constricted if the recently announced G7 price cap is not raised to keep pace with rising prices. “The moment that the price cap is below the market price, that’s when we would expect Russia to retaliate,” by curtailing oil exports, said J.P. Morgan's Global Head of Commodity Strategy, Natasha Kaneva.

The price of Brent crude, the international benchmark for oil sales, will average $90 per barrel next year, rising from $85 in the first quarter to end the year at about $94.

Having released more than 200 million barrels of oil from the Strategic Petroleum Reserve this year, the U.S. government will manage to replenish about 60 million barrels early in the new year, when prices are below its stated target of $72 per barrel. But further purchases will be stymied by rising prices.

Investors should favor energy stocks next year—but there is a "tactical" opportunity to sell them in the short term because they have yet to reflect the recent decline in oil prices. A 20%-30% pullback would the present "a great entry point," the analysts said.
Cliff_N

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[willvanam]

Suggesting puts/put spreads, a little late to the party