Global Commodities: Oil Markets: The Labors of Sisyphus

Speakers:  Natasha Kaneva, Head of Global Oil and Commodities Research Thomas Salopek, Global Cross Asset Strategy 

In our 2023 Outlook last November, we forecasted that the oil market would be in surplus in 2023, with fair value for Brent averaging $84, but believed OPEC+ alliance would succeed in balancing the markets, thus scaling up our average price forecast for the year to $90. We no longer believe that to be the case and recently revised our average 2023 price from $90 to $81. We keep the rising price path unchanged, with inventories now starting to draw. Demand is running above expectations: absent a deep recession, global oil consumption will likely rise a solid 1.6 mbd in 2023. However, more than offsetting this, global oil supply is set to increase 2.2 mbd. It is becoming increasingly clear that high oil prices over the past two years did exactly what they are supposed to do—incentivize supply. Crucially, non-OPEC+ supply has been keeping up with global demand since the start of 2022, leaving the OPEC+ alliance having to cut production to balance the markets. Moreover, within the broader OPEC+ alliance, supply has been also rising outside the core members. Invariably, to make room for this supply growth, OPEC+ would need to cut more, were the alliance to adhere to the market management strategy.

This podcast was recorded on June 15, 2023.This communication is provided for information purposes only. Institutional clients can view the related reports at  https://www.jpmm.com/research/content/GPS-4431498-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.