Oil prices will surge around 66% to US$125 per barrel in 2022, according to JP Morgan, which sees the crude market at the start of a new super-cycle’.

Crude could reach as high as US$150 per barrel by 2023, the US bank said.

“OPEC+ is back in the oil market driver’s seat,” JPM analyst Christyan Malek said in a note.

“The prisoner’s dilemma is over”, the analyst added (referring to the scenario in game theory where decision-makers in a group are incentivised to act against the broader interest of the group).

Malek reckons that the OPEC+ group, which includes the thirteen OPEC members plus Russia, has not been immune to impacts of underinvestment in the past eighteen months – amid lower prices and the rise in ESG and the decarbonisation movement.

“The group’s ability to control price (the steering wheel) depends on the efficacy of its spare capacity, which, at prevailing quotas, is set to fall to a 25-yr low of just 4% of total from an average of 14% (1995-2020), and well below the c.10% comfort level sought by consumers,” Malek said.

OPEC’s spare capacity will be 2mln barrels per day in 2022, according to Malek, who pointed to consensus forecasts are much higher, at 4.8mln barrels.

“While we believe a 3-month pause to 400,000 barrels per day monthly increments is needed during first half of 2022 to balance the market (and potentially a cut pending impact of new COVID variants), the group will struggle to deliver monthly growth over 250,000 barrels per day once reinstated,” the analyst said.

The OPEC+ capacity shortfall and underperformance is coming at “a critical juncture as other global producers falter”, he added.

“We see US$80 per barrel Brent (real) as the marginal cost to deliver a balanced market in 2024+.

“Incorporating our model of OPEC+ true capacity, we expect oil to overshoot to US$125 per barrel in 2022 and $150/bbl in 2023

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