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JP Morgan: Oil Prices Won't Go Higher Than $70

Tsvetana Paraskova

Oil prices at $70 may be the top of the range in the price of oil that we’re going to see over the next few years, David Kelly, chief global strategist at JPMorgan Asset Management, told “Bloomberg Daybreak: Americas” on Monday.

“Yes, we’ve got those geopolitical issues, but I don’t know if sanctions would be that effective, it has to be a global effect,” Kelly said.

Based on the cuts in production and on growth in the U.S. shale industry, oil at $70 a barrel may be “as high as it gets”, according to the strategist.

“That’s a price that I don’t think is hurting U.S. consumers too much,” Kelly said, adding that $70 oil is a price that’s actually helping the stock market and U.S. energy companies.

At the beginning of this year, J.P. Morgan lifted its Brent oil price forecast to $70 a barrel for 2018. The global economy will continue to expand, which will stimulate growth in oil demand and healthy prices, J.P. Morgan said in January, expecting that 2018 would be a year of two halves for the oil market and oil prices. The first half of the year will be so strong that Brent could hit $78 a barrel in the first or the second quarter. Yet, in the second half of the year, drillers will increase their production in response to the higher prices, and this higher production may weigh on oil benchmarks, according to J.P. Morgan.

Related: How Significant Is WTI’s Breakout?

Last week, oil prices hit three-and-a-half year highs as geopolitical concerns over a military strike in Syria and possible fallout across the Middle East trumped concerns over surging U.S. shale production and over a potential downside to global oil demand stemming from a possible trade war.

Early on Monday, oil prices dropped as fears started to subside about massive fallout from the Syria strikes. At 11:07 EDT, WTI Crude was down 1.16 percent at $66.61, while Brent Crude traded down 1.07 percent at $71.80.

Profit-taking after the U.S.-UK-France air strikes on Syrian targets on Saturday sent oil prices down on Monday.

While there hasn’t been escalation after the strikes, analysts continue to caution that the geopolitical risk continues to remain very high.

By Tsvetana Paraskova for Oilprice.com

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