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Below $80/bbl Brent Looks Oversold: JP Morgan

OIL

Brent oil below $80/bbl looks at least $5-$7 oversold, purely on fundamental reasons according to a JP Morgan client note.

  • Prices will likely end 1Q around $3/bbl below the bank’s forecast of $85/bbl.
  • Russia’s production cuts have not been a catalyst for price gains because they were from an already elevated production level of 10.2mn bpd – indicating the 500kbd will only fall to 9.7mn bpd – a shallower cut than previously indicated.
  • For upside factors, the bank highlighted three key resilient indicators:
  • Global balances are set to shift from inventory builds to draws by mid-year.
  • US crude stockpiles likely to build in April on SPR releases but stabilize in May and begin drawing from June.
  • Resolution of French strikes to boost demand for crude by 600k b/d.

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