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JPMorgan Warns of Oil Oversupply Risk Next Year
26 Jun
Summary
- JPMorgan revised Brent crude forecasts downward for late 2026 and 2027.
- Demand weakness absorbed more oil supply shock than inventory drawdowns.
- Commercial inventories remain un-depleted, impacting post-shock price support.
JPMorgan has revised its Brent crude oil price targets downwards, projecting an average of $86 per barrel in Q3 2026 and $80 in Q4, before falling to an estimated $64 average for 2027. This significant drop reflects the bank's growing concern over a potential structural oil surplus building into next year.
The bank indicated that the oil market absorbed a recent supply shock primarily through demand weakness rather than significant inventory drawdowns. Private operators largely relied on Strategic Petroleum Reserve releases, keeping commercial inventories un-depleted. This lack of depletion means the typical post-shock demand for rebuilding stocks will be absent, influencing future price support.
JPMorgan also warned that the anticipated oversupply in late 2026 and early 2027 may necessitate production curtailments. They foresee a period of maximized output in late 2026, potentially followed by OPEC+ making cuts in early 2027 to manage inventory levels. Supply is projected to grow simultaneously in 2027 from seven countries, including the United States, Iran, and Venezuela.
