JP Morgan has lowered its Brent crude oil price forecast for the second half of 2026, citing weaker-than-expected demand and slower inventory drawdowns. The investment bank said the oil market has evolved differently than previously anticipated, reducing upward pressure on global crude prices.
The revised outlook reflects changing market fundamentals, including softer oil consumption, rising supply, and weaker inventory declines across major economies.
JP Morgan Revises Brent Crude Price Outlook
JP Morgan now expects Brent crude to average $86 per barrel in the third quarter of 2026 and $80 per barrel in the fourth quarter.
The bank also projects Brent crude to end 2026 at $78 per barrel, marking a lower outlook than its previous estimates.
Analysts said weaker inventory drawdowns and larger demand losses prompted the revision. These factors have eased concerns about supply shortages and limited the potential for stronger price gains.
Weaker Demand Reduces Pressure on Oil Prices
According to JP Morgan, commercial crude inventories in OECD countries have declined at a slower pace than expected.
At the same time, oil demand has weakened more than the bank’s earlier models projected.
The combination has significantly changed the balance of the global oil market.
Instead of tightening through strong consumption and falling inventories, the market has adjusted through weaker demand. As a result, crude prices have faced less upward momentum than initially expected.
The bank noted that this shift represents a meaningful change in how the market has rebalanced during 2026.
Oil Supply Continues to Increase
While demand has softened, global oil supply has continued to rise.
JP Morgan said oil flows are currently running at around 8.6 million barrels per day (bpd). By comparison, average flows stood near 6.3 million bpd during June.
Current production levels remain well above those recorded in April and May.
The increase in supply has added further pressure on oil prices, especially as demand growth has failed to keep pace.
Higher production has also contributed to concerns about a potential oversupply later this year.
Strategic Reserves Support Refinery Operations
JP Morgan said private oil operators have largely avoided drawing down their own inventories.
Instead, refiners have relied heavily on government Strategic Petroleum Reserve (SPR) releases to maintain operations.
This approach has helped keep refinery gates open without significantly reducing commercial stockpiles.
As a result, inventory declines have remained more limited than market participants initially expected.
Inventory Drawdowns Expected Through Mid-Year
Despite lowering its price outlook, JP Morgan still expects OECD oil inventories to decline further in the coming months.
The bank forecasts an additional 50 million-barrel drawdown between April and July.
However, analysts believe these declines may not be sufficient to offset increasing production and slowing demand during the second half of the year.
As supply continues to outpace consumption, downward pressure on oil prices could persist.
Production Cuts May Become Necessary in 2027
JP Morgan warned that the market could face a significant oversupply during the fourth quarter of 2026 and the first half of 2027.
If current production trends continue, oil producers may need to reduce output early next year to stabilize the market.
The bank expects producers to maximize production during the remaining months of 2026 before considering output curtailments in 2027.
Such measures could help restore balance if global demand fails to recover.
Broader Supply Growth Could Keep Prices Under Pressure
Looking ahead, JP Morgan expects global oil production to continue expanding in 2027.
The bank identified several countries expected to increase output, including Venezuela, Iran, Brazil, Guyana, Argentina, Canada, and the United States.
Additional supply from these producers could place further downward pressure on Brent crude prices if global consumption remains subdued.
Market participants will continue monitoring economic growth, fuel demand, and production trends as key factors shaping the outlook for oil prices over the coming year.