American Oil and Gas Reporter - January 2022 - 40

triple digits in the near term. First, in the
final days of November-right as news of
the Covid-19 Omicron variant sent the
stock and commodity markets into a tailspin-media
reports noted that J.P. Morgan
analysts nevertheless were insisting that
crude could hit $125/bbl in 2022 and
$150/bbl in 2023.
Published reports cited the firm's contention
that OPEC+ " has returned to a
position of positive leverage, which it
will defend by keeping inventories low,
the market in balance and taking action
to support optimal reservoir management
through paced volume growth. "
According to press accounts, JP Morgan
analysts also warned that their estimates
showed that OPEC+'s spare production
capacity was not a widely presumed
4.8 MMbbl/d, but probably a
much more modest 2.0 MMbbl/d. The
analysts also expressed doubt the coalition
would fully make good on promised
output increases.
" They don't have the barrels. It's a
mirage, " Christyan Malek, head of the
firm's EMEA oil and gas research is
quoted. " Look back at history. When
we're in a scenario where the market
goes, 'Oh (shoot), we don't have spare
capacity,' that's where you see overshoots. "
A
few weeks later, experts at Goldman
Sachs said they could see realistic scenarios
that would push global crude above $100
in 2022. During a Dec. 17 media briefing
that noted global crude demand had
reached new heights before Omicron surfaced,
Damien Courvalin, Goldman Sachs'
head of energy research, suggested that
trend would continue in 2022 and '23.
" We will have to wait for this wave to
pass, but international travel should recover
further next year, " Courvalin is quoted.
" You see how we will average a new
record high in demand in 2022, and again
in 2023. "
Media reports note the firm predicts
Brent prices will average $85/bbl in 2022,
with a possibility they could go as high
as $110 under scenarios reflecting oil
field inflation and flagging supply. " There's
inflation everywhere in the economy, and
eventually there is inflation in oil services, "
Courvalin reportedly assessed, deeming
it " quite conceivable " that the appetite
for oil in a soaring, post-pandemic world
economy could exceed supply.
Ultimately, he told reporters, " There's
insufficient supply in the face of strong
demand. Oil prices have to be higher to
overcome the higher cost of capital to
fund projects. "
Although geopolitical unknowns always
have the potential to send crude
prices soaring, several bearish factors
could come into play in 2022. Along
with scenarios in which the pandemic
continues to cast a long shadow on the
world economy, or a new U.S.-Iran nuclear
deal adds new production to global supplies,
press accounts point to a possible
renewed trade war between the United
States and China, a stronger dollar, and
rising inflationary pressures as variables
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American Oil and Gas Reporter - January 2022

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