JP Morgan analysis shows global oil supply dropped by approximately 11.1 million barrels per day since the US-Iran conflict began in February, yet Brent crude prices remain about $20 below the April-May highs despite trading above $101 per barrel recently. The investment bank attributes this price stability to demand destruction occurring faster than market expectations, with the International Energy Agency (IEA) now forecasting global oil demand to decline by 1 million barrels per day this year. This demand reduction represents the steepest decline in six years excluding the 2020 pandemic period, according to JP Morgan strategist Natasha Kaneva's assessment reported by Yahoo Finance on the 26th (local time).
Global Oil Supply Decreased 11.1 Million Barrels Daily Since February Conflict
JP Morgan strategist Natasha Kaneva analyzed that global oil supply has decreased by approximately 11.1 million barrels per day since the US-Iran conflict began in February, reducing global oil inventories to historic lows. This volume represents approximately 10% of global oil demand. Despite this supply reduction, Brent crude recently traded above $101 per barrel but remains approximately $20 lower than the highs recorded in April-May during the early war period. JP Morgan explained that prices remained relatively stable despite supply shortages because the market reduced demand much faster than expected. "Initially, we expected the supply reduction burden would mostly translate into inventory drawdowns while demand would continue to increase, but the exact opposite occurred," JP Morgan stated.
IEA Revises Demand Forecast Downward From 420,000 to 1 Million Barrels Daily
The International Energy Agency (IEA) forecasts global oil demand will decrease by 1 million barrels per day this year. This represents more than double the reduction from the 420,000 barrels per day decline forecast presented in the May report. JP Morgan assessed that this year's oil demand reduction pace is the steepest in the past six years, excluding the 2020 COVID-19 pandemic. JP Morgan explained, "Considering that the global economy showed growth above potential growth rates in the first half of this year, such a large-scale demand reduction is difficult to accept easily."
China Oil Import Reductions and Strategic Reserve Releases Drive Consumption Drop
Some analysts suggest China may have released stockpiled reserves not captured in official statistics. China, the world's largest oil importer, recently reduced oil imports significantly, alleviating supply pressure in the global oil market according to analysis. However, JP Morgan diagnosed that even accounting for China factors, the recent demand reduction remains at a level difficult to explain. Southeast Asian countries reduced working days, European airlines cut flight operations, and the United States released large-scale Strategic Petroleum Reserves (SPR), causing global oil consumption to plummet in a short period. JP Morgan evaluated, "Even recalculating supply-demand balance retrospectively, we would not have assumed demand destruction more than twice as large as during the global financial crisis. This very point makes this oil market a highly exceptional case."
FAQ
Why did oil prices not return to early-war highs despite supply cuts?
JP Morgan analysis indicates that demand destruction occurred faster than market expectations, offsetting the impact of supply reductions. The IEA revised its global oil demand forecast to a decline of 1 million barrels per day this year, more than double the 420,000 barrels per day reduction forecast in May.
What factors contributed to the unexpected oil demand reduction?
China significantly reduced oil imports, Southeast Asian countries reduced working days, European airlines cut flight operations, and the United States released large-scale Strategic Petroleum Reserves, causing global oil consumption to decline rapidly in a short period according to JP Morgan.
