JPMorgan’s Oil Price Forecast and Its Impact on Brazil

JPMorgan predicts that oil prices will average $83 per barrel in 2024 and decrease to $75 in 2025.

The bank forecasts a decline in demand additions from 1.9 million barrels to 1.6 million in 2024 and 1 million by 2025.

The trend shows a shift to supply-driven market dynamics, with non-OPEC+ countries like the U.S., Canada, Guyana, and Brazil boosting supply.

In the medium and long term, JPMorgan expects oil prices to stabilize around $80 per barrel.

The projection accounts for the energy transition, lower investment in oil fields, and a focus on boosting shareholder returns.

Investments in energy transition are reallocating funds away from the core oil business, reducing spending on maintenance and capacity growth.

In Brazil, the oil price forecasts are expected to impact various sectors and the stock market.

An anticipated increase in the stax tate (ICMS) in February could raise gasoline prices. Oil’s contribution to Brazil’s GDP, which was 3% in 2021, is likely higher now.

A 15% production increase predicted for this year could add 0.5% to the GDP.

Brazil has emerged as a major exporter

The trade balance in Brazil may see significant effects. Historically a net importer of oil, Brazil has emerged as a major exporter.

The oil sector’s surplus was nearly $30 billion in 2023, accounting for a third of the country’s $100 billion trade surplus.

Energy transition investments are shifting funds from core oil operations, cutting maintenance and capacity expansion spending.

The oil sector is a key revenue driver in Brazil.

2022 the market expected a negative primary result, but Brazil achieved its first primary surplus in years, largely influenced by the oil sector.

JPMorgan maintains an optimistic view on Brazilian stocks, highlighting lower interest rates, attractive valuations, and appeal to foreign investors.

The bank prefers junior oil companies for their individual narratives but holds a neutral view on the sector overall due to Petrobras.

PRIO is the bank’s top pick, with 3R Petroleum also favored for its high potential.

Petrobras maintains a neutral rating, with uncertainties around dividend yield and performance affecting investor perception.