JPMorgan forecasts energy "supercycle" with Brent crude potentially hitting $150 per barrel

In a research report published on Friday, JPMorgan analyst Christyan Malek upgraded the entire global energy sector to an overweight rating, warning that the recent surge in oil prices could potentially drive Brent crude prices as high as $150 a barrel by 2026. This prediction is based on factors such as capacity shocks in the near to medium term, an energy "supercycle", and an ongoing transition away from hydrocarbons.

The recent increase in oil prices has been stimulated by production cuts from OPEC and Russia, coupled with higher demand. This trend has sparked inflationary concerns and the possibility of prolonged high interest rates. Consumer prices in August showed a 0.6% month-over-month increase, the largest monthly gain of the year, partly due to rising energy prices. On Friday, Brent prices rose another 1% to trade around $94 a barrel following a fuel export ban from Russia that reignited global supply fears.

Malek anticipates Brent prices to range between $90 and $110 in 2024, and between $100 and $120 in 2025. However, JPMorgan still expects Brent to hover around $80 per barrel over the long run, although there's a risk that long-term prices could settle at about $100 a barrel.

According to JPMorgan, the global supply/demand imbalance is likely to stand at a 1.1 million barrel a day deficit in 2025 but widen to 7.1 million barrels per day in 2030. This scenario is driven by both a robust demand outlook and limited supply sources.

"Put your seatbelts on. It's going to be a very volatile supercycle," Malek told Bloomberg on Friday. He explained that dwindling investment in new oil production, along with production cuts from OPEC and other top oil producers, will lead to higher crude prices for years to come.

Despite fears of a U.S. and European recession, which would typically lead to falling oil prices as investors anticipate fading consumer demand, crude oil prices have surged in 2023 due to a lack of new oil production and production cuts from the world's largest producers.

In light of this looming energy "supercycle," JPMorgan sees a positive outlook for global energy producers and named Shell (LON:SHEL), Baker Hughes, and Exxon Mobil (NYSE:XOM) among its best ideas.

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