JPMorgan said it has no clear baseline outlook for oil markets, citing uncertainty over how the U.S.-Israeli war with Iran will end and the lack of a clear exit strategy.
The bank noted that Brent is around $106/bbl, above its estimated September fair value of about $90/bbl, while U.S. gasoline and diesel prices have surged. It estimated that roughly 10 million bpd of oil supply has been disrupted, although the impact on prices has been moderated by weaker demand and relatively limited inventory drawdowns.
Global crude and refined-product inventories have fallen by about 555 million barrels since the conflict began—only around one-third of JPMorgan’s earlier estimate—while global oil demand is about 4.4 million bpd below year-ago levels.
JPMorgan said substantial inventories in China, Europe, Japan and South Korea could provide a buffer in the near term. However, prolonged disruptions in the Middle East could push oil prices higher later this year as inventories decline and the market becomes increasingly reliant on demand reduction to maintain balance.
The bank concluded that sufficient spare inventories remain to contain prices for now, but emphasized significant upside risks if supply disruptions persist.