Spooked by the darkening economic clouds hovering above the global economy, J.P. Morgan (NYSE:JPM) took an axe to its 2012 and 2013 forecasts for oil prices on Monday.
The bearish report comes as crude oil prices have tumbled in seven of the past eight weeks, including a 5.4% decline last week to the lowest levels since the fall.
Pointing to softening demand and rising inventories, J.P. Morgan downgraded its 2012 target for WTI crude by $12 to $96 a barrel and its 2013 forecast by $22 to $99, according to Reuters. The analysts also slashed their 2012 Brent price by $13 to $106 a barrel and 2013 forecast by $21 to $104 a barrel.
"Global petroleum demand in second quarter of 2012 has slackened even further than we expected, as recent economic activity has disappointed our already modest expectations,” J.P. Morgan wrote in the note.
Risky assets like stocks and commodities have retreated in recent weeks as the eurozone’s sovereign debt crisis continues to escalate, threatening to slow growth around the world. At the same time, China’s previously red-hot economy has continued to slow, hurting demand for commodities.
According to Reuters, J.P. Morgan lowered its 2012 demand growth outlook to 0.60 million barrels per day from 1 million barrels per day.
Still, analysts at J.P. Morgan anticipate global oil prices bouncing back from their current levels thanks to the Iranian oil sanctions, seasonal factors and improving economic fundamentals.
Crude suffered another selloff on Monday, recently trading off $1.11 a barrel, or 1.39%, to $78.65.