Investing.com -- Oil prices could rally to $100 a barrel as soon as September following Russia's shift to cut production, though the U.S. is likely to tap its emergency oil reserves to keep a lid on prices.
"Russia's actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September, keeping pressure on the US administration in the run-up to elections," JPMorgan (NYSE:JPM) said in a note, adding that oil prices have risen by 18% since bottoming in mid-December.
The jump in oil prices was expected to persuade OPEC and its allies, or OPEC+, to ease their voluntary output cuts, but Russia instead pledged in early March to deepen its output cut by a cumulative 471,000 barrels per day, or bpd, bringing the country's crude oil output to 9M bpd in June to meet its agreed OPEC+ output limits, JPMorgan estimated.
But the road to $100 a barrel Brent oil faces many challenges not least a policy response in the U.S. as high oil and gas prices during an election year isn't likely to be tolerated. But as higher oil prices begets higher prices at the pump gas prices back above $4 a gallon could trigger the U.S to turn on to its Strategic Petroleum Reserve spigot, once gain, and release millions of barrels to cushion against price shocks.
"The odds of another release will rise if US nationwide gasoline prices move closer to $4/gallon— something we believe can happen as soon as May —or if OPEC+ does not increase production at the June 1 meeting," JPMorgan said, estimating that the U.S. administration has the policy space to release up to 60 million barrels of crude oil.
In 2022, President Joe Biden's administration sold 180 million barrels of oil over a six period from the U.S. strategic petroleum reserve to lower gasoline prices after Russia invaded Ukraine.
Yet, surging oil prices above $90 a barrel could likely meet a familiar foe: waning demand.
Others agree, and flag the $90 a barrel mark as a level at which most of the upside will likely be mostly priced, Macquarie said.
"If Brent reaches $90, we believe most of the upside will be factored into oil and the remaining unpriced fundamental factors, mostly supply growth related, will largely be bearish," Macquarie said.