economy
‘Simple math’: JPMorgan analyst makes the case for why oil prices should push even higher
Oil inventories and demand destruction have not balanced the supply disruption from the Iran war, JPMorgan said. Prices need to rise to close the deficit.
TL;DR
- Oil prices need to rise to balance the supply disruption from the Iran war, according to JPMorgan analyst Natasha Kaneva.
- Current Brent futures around $100 and spot prices near $121 per barrel are not high enough to reduce demand and balance the estimated 13.7 million bpd supply gap.
- Saudi Arabia and the UAE, holding most spare capacity, cannot export through the Strait of Hormuz due to the war, removing a traditional shock absorber.
- Nations are drawing down inventories by 7.1 million bpd, reducing the global gap to 6.6 million bpd before demand destruction.
- Demand is expected to fall by 4.3 million bpd, leaving a 2.3 million bpd gap that emerging economies alone cannot balance.
- Higher prices are needed for Europe and the U.S. to participate in balancing the deficit, with Europe already facing tight fuel markets and the U.S. seeing early signs of demand softening.