JPMorgan says oil could spike to $150, gets very bullish on energy stocks

Published Fri, Sep 22 202310:18 AM EDTUpdated Fri, Sep 22 202311:23 AM EDT

Get ready for higher energy costs, JPMorgan said Friday, warning that the latest surge in oil prices may have a lot further to run. Analyst Christyan Malek upgraded the entire global energy sector to an overweight rating in a 44-page research report, saying that capacity shocks over the near to medium term and an energy "supercycle" could eventually drive up Brent crude prices — the global benchmark — as high as $150 a barrel. The recent uptick in oil prices , sparked by output cuts from OPEC and higher demand, has fueled inflationary fears and heightened concern that interest rates may stay at today's lofty levels for longer. Consumer prices in August, for example, showed a 0.6% month-over-month increase, the largest monthly gain of the year, partly owing to uptick in energy prices. Brent prices rose another 1% Friday to trade around $94 a barrel as a fuel export ban from Russia reignited global supply fears. A higher-for-longer interest rate environment is one key underpinning JPMorgan's bullish oil call, by crimping the amount of capital investment devoted to energy exploration and production. Another catalyst is "institutional and policy led pressures driving an accelerated transition away from hydrocarbons." Both will result in "a self-reinforcing higher-for-longer energy macro outlook" and make it tough for the industry to justify long-term capital expenditures beyond 2030, Malek said. @LCO.1 1M mountain Brent crude prices over the last month Malek expects Brent prices to range between $90 and $110 in 2024, and between $100 and $120 in 2025 before hitting as high as $150 by 2026. Over the long run, however, JPMorgan still expects Brent to hover around $80 per barrel, although there's a risk that long-term prices could settle at about $100 a barrel. On current trends, 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, "driven by both a robust demand outlook and limited supply sources," JPMorgan said. "[Long term] appears well underpinned by tight [supply and demand] balances and elevated corporate breakevens, while OPEC's falling spare capacity generates additional risk premium of ~$20/bbl based on periods in the past that have experienced reduced levels of spare capacity," Malek wrote. Amid this looming energy "supercycle," JPMorgan sees a positive outlook for global energy producers and named Shell , Baker Hughes and Exxon Mobil among its best ideas. — CNBC's Michael Bloom contributed reporting.