JPMorgan upgraded the global energy complex to an ‘overweight’ rating as it sees the possibilities of an energy ‘supercycle’ due to low levels of CAPEX over the past few years and near-term supply shocks. The bank believes that Brent crude oil prices could reach $150 by 2026. It sees upside for major energy producers and operators like Shell, Baker Hughes, and Exxon Mobil.

Oil prices have risen in the second-half of the year with WTI crude oil exceeding $90. This places strain on consumers, adds to inflationary pressures, and complicates chances of a Fed pivot. Oil prices have maintained their gains despite increasing concerns that a recession may be materializing given soft labor and consumption data.

The biggest driver of prices has been stronger than expected demand coupled with OPEC production cuts. It sees a tight supply/demand dynamic lingering over the intermediate-term which means increased susceptibility to geopolitical shocks. Based on current trends, the bank anticipates a 1.1 million barrel per day deficit in 2025 which could widen to 7.1 million barrels per day in 2030. 

Finsum: JPMorgan sees the possibility of an energy supercycle due to demand remaining resilient and supply concerns.