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Expect $100 to be the new normal for oil prices thanks to production cuts, higher interest rates, and lack of investment, JPMorgan energy analyst says

Crude
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  • Oil prices are set to normalize at around $100 a barrel, according to a top JPMorgan energy analyst.

  • "Put your seatbelts on. It's going to be a very volatile supercycle," Christyan Malek told Bloomberg.

  • Crude prices could hold at elevated levels, thanks to a trifecta of production cuts, high interest rates, and lack of investment in the oil industry, he added.

Global oil prices could see a new normal around $100 a barrel thanks to a trifecta of higher interest rates, production cuts, and lack of investment in the industry, according to a top JPMorgan energy analyst.

Speaking in a Bloomberg interview, Christyan Malek warned of a volatile ride for crude costs for the foreseeable future.

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"Put your seatbelts on. It's going to be a very volatile supercycle," Malek told the outlet.

"The flow of capital into new oil supply is just not what it was like in the last 30 years," he said. "So what that's doing is driving the long-term price, the back end of the curve, up to $80, or north of $80. We think it probably normalizes around $100," he added.

Oil prices have rallied again in recent months as key oil producers Saudi Arabia and Russia press ahead with production cuts in a bid to maintain price stability.

Crude prices are on track for their fourth-monthly win, with the Brent contract, the international benchmark, rising above $90 a barrel.

"They [OPEC] have a sort of fiduciary duty to make sure they're stabilizing the price [of oil]," Malek said. "I think what they're trying to do is make sure it stays within a range. So by definition, if we see a very cold winter or hurricanes and prices spike very quickly, they'll be managing the upside just the way they're managing the downside," he added.

Interest-rate increases by global central banks have also contributed toward the boost in crude prices, with higher borrowing costs making it costlier to invest in oil projects - thereby reining in supply, Malek noted.

Over the past six quarters, the Federal Reserve has hiked benchmark US rates from near-zero levels to upward of 5% to cool inflation.

Read the original article on Business Insider