JPMorgan says global oil market has returned to surplus

The global oil market is moving back into surplus after months of disruption from conflict in the Middle East, JPMorgan ↗ 3.49% said in a note on Wednesday, Nov. 4. The bank said recovering exports from the region and weaker global demand are now pushing supply ahead of consumption.reuters.com

The bank estimates the market returned to a surplus of 1.1 million barrels per day in September, which widened to 1.4 million bpd in October. That is close to last year's average surplus of 1.3 million bpd.boereport.com

Exports recover, demand weakens

JPMorgan said the main driver was a rebound in Middle Eastern oil exports to about 20.7 million bpd, up from a low of 9.8 million bpd in March. Volumes are still below pre-war levels. Supply from elsewhere has also grown. The bank estimates Latin America alone is producing about 1.5 million bpd more crude than a year ago, led by Brazil, Venezuela, Guyana and Argentina.boereport.com

Demand has moved the other way. JPMorgan estimates global consumption has fallen by about 3.3 million bpd since the conflict began, as high fuel prices and supply disruptions held back buying. The bank said inventories and trade flows both show excess barrels coming back to market. Global crude imports rose to 44.9 million bpd in October, up 1.3 million bpd from a year earlier.boereport.com

Prices still elevated

The bank's view comes as prices remain high and volatile. Brent crude settled on Friday, Oct. 30, at its highest level since late April after a tanker was attacked in the Strait of Hormuz. It then fell to a nearly four-week low on Tuesday, Nov. 3, as traders weighed talks to end the wars in Ukraine and Iran. On Wednesday, oil rose in choppy trading after Democrats won control of Congress in the US midterm elections, and investors waited to see what Washington would do next on Iran. A larger-than-expected drop in US crude inventories, reported in American Petroleum Institute data, also supported prices.brecorder.com+2

Analysts divided on risk

Other banks see more risk on the supply side. Goldman Sachs ↗ 2.26% raised its December Brent forecast to $105 a barrel from $90. It warned that prices could reach $140 in 2027 if Gulf production stays 3.5 million bpd below its 2025 average.bfsi.economictimes.indiatimes.com

JPMorgan's surplus estimate points to looser supply and demand. Traders, however, are still watching the Strait of Hormuz. One analyst told Reuters that "the underlying supply disruption risks around the Strait of Hormuz have not disappeared".brecorder.com