(Reuters) – JP Morgan on Wednesday lowered its outlook for global oil demand for 2022 by one million barrels per day (bpd) citing higher oil prices, a deteriorating growth outlook and escalating geopolitical tensions.
“We now see total oil demand averaging 100 million bpd, 400,000 bpd below 2019 levels,” the bank said in a weekly note.
JPM maintained its Brent price forecast at $114 a barrel in the second quarter of this year, and at $104 a barrel for calendar 2022.
Oil prices are stuck in a tight range as weakness in global oil demand and releases of strategic reserves even outgrowing expectations that Europe may agree to curb oil purchases from Russia, the bank said.
“With all these factors canceling each other out, we still expect a balanced market in 2022,” it said.
Oil prices jumped about $5 on Wednesday, taking Brent crude futures to $110.14 a barrel, as the European Union, the world’s largest trading bloc, spelled out plans to phase out imports of Russian oil.
JP Morgan noted that Russia’s ability to re-route its oil flows could pose a risk to its forecast and that Russian crude oil would need to be discounted for China to increase its purchases for the global market to remain sufficiently supplied.
It also warned that due to tightness in the oil market, the loss of an additional one million bpd could result in oil prices surging $18-$35 a barrel above its price target.