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Oil prices lag despite supply losses as demand falls faster
JPMorgan strategists link the weak crude move to a sharper drop in global oil demand, with inventory draws not matched by demand strength.
Despite geopolitical disruptions, including reduced traffic through the Strait of Hormuz and attacks that threaten shipping through the Red Sea, oil prices have not risen as much as supply losses might suggest, according to Yahoo Finance. Since the conflict began in late February, the world has lost about 11.1 million barrels per day of oil supply, or roughly 10% of global demand, drawing inventories down to record lows.
Brent futures crossed above $101 per barrel on Thursday and US WTI crude moved past $92, but both benchmarks remain about $20 below their April and May highs. The gap reflects a market rebalancing driven mainly by demand, with JPMorgan strategists led by Natasha Kaneva saying demand has fallen faster and more steeply than in any of the past six years except the pandemic downturn in 2020.
The strategists argue that if inventories and supply had fallen to current lows without a demand adjustment, prices would likely have risen much more quickly. They also point to expectations for demand to decline by about 1 million barrels per day this year, citing the International Energy Agency’s latest monthly oil market report, compared with the IEA’s May estimate of a 420,000 barrels per day decline.
Yahoo Finance also reports the IEA forecast signals a material shift and raises questions about where the demand destruction came from and whether it is sustainable. The JPMorgan strategists said the scale of the demand loss is extraordinary, particularly because the global economy grew above potential in the first half of the year.
Latest closeWTI crude $90.47 ▼1.9%|Brent $98.38 ▼2.3%