Oil will advance to $120 a barrel before the end of 2012 as consumption grows in emerging economies, according to JPMorgan Chase & Co.
The Organization of Petroleum Exporting Countries, which is responsible for about 40 percent of global supplies, is unlikely to increase production in the first half of next year unless prices surge through $100 a barrel, the bank said in a report today. Futures traded around $87 a barrel in New York today, near their highest price in two years.
“Strong emerging oil demand growth over the next 24 months is very likely to lift the call on OPEC production to levels last seen at the peak of the oil price spike in 2008,” analysts led by Lawrence Eagles in New York said. “We expect oil inventories to continue their drawing trend over the first quarter.”
JPMorgan boosted 2011 price forecasts for oil contracts in New York and London. West Texas Intermediate on the New York Mercantile Exchange will average $93 a barrel next year, up 3.6 percent from a previous estimate of $89.75, it said. Brent crude traded in London will average $95 a barrel next year, up from an earlier assessment of $91.75.
The bank said the North Sea benchmark, used to price two- thirds of global crude, will average $105 in 2012. It expects futures to reach $100 a barrel in the first half of 2011.
Brent crude for next month is trading at a 4-cent premium to the February future, a price situation known as backwardation that suggests immediate supplies are more in demand than later deliveries. This is a “structure that is likely to remain in place for much of 2011 and 2012,” JPMorgan said.
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