An analyst at JPMorgan Chase said that as the Federal Reserve is expected to pause interest rate hikes after May, international oil prices are expected to rise soon and reach $94 per barrel by the end of the year.
JPMorgan's latest report shows that since 1988, after the Fed raised interest rates for the last time of each tightening cycle, Brent crude oil prices rose three months thereafter, with an average increase of 9%.
Based on this pattern, JPMorgan expects Brent crude to rise to $94 a barrel in the fourth quarter of this year, equivalent to a 9.5% gain from current levels, if the Fed pauses rate hikes after May as expected.
"The main takeaway at this point is that if the Fed pauses in rate hikes soon, the most likely scenario is that oil prices will perform outstandingly," the analyst said.
According to the CME FedWatch tool, the market generally expects the Fed to raise interest rates again by 25 basis points in May to the target range of 5-5.25%, with a probability of more than 85%.
The market expects a 65.9% probability of suspending interest rate hikes in June, and only a 23.8% probability of continuing to raise interest rates by 25 basis points.
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