Analysts at JPMorgan and Goldman Sachs report a return to oil market oversupply as high prices erode demand, effectively cooling the deficit fears that previously supported crude prices.
JPMorgan estimates the oil market returned to a surplus of 1.1 million bpd in September, widening to 1.4 million bpd in October, as high prices destroy demand. A returning glut and fading deficit fears point to lower prices, consistent with the reported 12% weekly loss. However, Goldman sees the market as balanced and the war premium plus tanker attacks in the Strait of Hormuz could keep prices supported.
Analysts at JPMorgan estimate the market flipped back into surplus of up to 1.4 million barrels per day in October as high prices destroyed demand, and Goldman saw no global inventory drawdowns in two months, offsetting the war risk premium.
Possibly — flows through Hormuz are still only 86% of pre-war levels and October Middle East exports pulled back on heightened risks, and the article notes futures remain substantially higher than at the start of the year because the war premium is still alive.
JPMorgan's estimate of a global surplus of 1.4 million bpd in October, up from 1.1 million bpd in September, weighs on crude benchmarks as demand destruction from high prices erases deficit fears. Brent futures are still substantially higher than at the start of the year, but the war premium has weakened after the Democrats' midterm sweep, and prices are heading for a 12% weekly loss. Goldman's balanced-market view and Hormuz tanker attacks are counterweights.
JPMorgan thinks so, estimating a surplus of 1.1 million barrels per day in September and 1.4 million in October, but Goldman Sachs sees the market as balanced and prices remain well above the start of the year.
Continued Iranian attacks on tankers in the Strait of Hormuz, where flows are still only 86% of pre-war levels, and the IEA's warning that annual supply will decline by 5.8 million barrels per day could keep a floor under prices.
The global oil market has shifted back into a surplus, with JPMorgan estimating a supply excess of 1.4 million barrels per day in October. High prices have triggered significant demand destruction, offsetting geopolitical risks and keeping crude benchmarks on track for a 12% weekly loss despite ongoing tanker attacks in the Strait of Hormuz.
While the war premium remains, market fundamentals have shifted toward oversupply. JPMorgan estimates a surplus of 1.4 million barrels per day in October, as high prices have successfully destroyed demand, offsetting concerns about supply disruptions.
Flows are currently at 14 million barrels per day, which represents 86% of pre-war levels. While exports have pulled back slightly due to heightened security risks and recent tanker attacks, the volume remains significant enough to prevent a total supply collapse.