Brent crude breached $80 a barrel on Monday — its highest level since November 2014 — on the back of a tightening oil market and OPEC leaders signaling they won’t be immediately boosting output.
Oil futures in London jumped 2.7 percent while some traders predicted the risk of prices exceeding $100 a barrel.
J.P. Morgan wrote in its latest market outlook that “a spike to $90 per barrel is likely” in the coming months thanks to U.S. sanctions on Iranian oil exports, which have fallen dramatically in recent months as importers brace for the impending penalties. The bank forecasts Brent and U.s. benchmark WTI prices to average $85 and $76 per barrel, respectively, in the next six months.
A meeting of OPEC and non-OPEC oil ministers in Algiers over the weekend concluded with the 15-nation cartel and its allies refraining from an urgent boost in output, despite President Donald Trump’s demands that it work harder to bring down prices. The ministers said they would increase output only in the event that customers wanted more cargoes.
Global benchmark Brent crude was trading at $80.66 a barrel on Monday at midafternoon London time (late morning ET), after having climbed from $71 in the last five weeks.
Monday’s fresh multiyear high for Brent was always on the cards, said Stephen Brennock, oil analyst at PVM Oil Associates in London.
“Price risks remain skewed to the upside in the run-up to looming U.S. sanctions on Iranian oil exports. This outlook has been cemented by inaction on the part of OPEC+ over the weekend, which has in effect green-lighted a forthcoming supply squeeze, ” he told CNBC.
The analyst sees the current bout of upward buying pressures persisting through to the end of the year, but warned that the outlook for 2019 was a different story.
“The oil balance in the early part of 2019 makes very bad reading for oil bulls with a sizable supply surplus penciled in by the leading energy agencies,” he said. “This will inevitably take the steam out of the current upswing in oil prices.”