OilPrice.com By Irina Slav
Brent crude touched $90 per barrel briefly this week for the first time in years. This latest jump was attributed to tensions around Ukraine, but this is the most transitory reason for oil price rises. The bigger reasons all have to do with fundamentals. And $90 per barrel of Brent may be only the beginning. A lot has been written recently about OPEC’s spare capacity and the not too rosy outlook for it. That spare capacity is in decline for several reasons, but chief among them appears to be underinvestment. As a result, JP Morgan earlier this month warned that Brent could rise to $125 per barrel as OPEC’s spare production capacity falls to 4 percent of total capacity by the fourth quarter of 2022.
The International Energy Agency has gone even further, warning OPEC spare capacity could fall by half to just 2.6 million bpd in the second half of the year. The agency then went on to say that, “If demand continues to grow strongly or supply disappoints, the low level of stocks and shrinking spare capacity means that oil markets could be in for another volatile year in 2022.”…
