JPMorgan said on the 17th that it is unable to present a clear base-case scenario for the crude oil market for the first time since the war between the United States and Israel and Iran began. In a report, the bank's analyst team said it simply cannot model how the war will ultimately conclude, noting that many of the economic red lines the U.S. administration was assumed not to cross at the start of the conflict have been crossed over the course of six months, with no clear exit strategy in sight. Crude prices have topped 100 dollars a barrel, U.S. gasoline prices have hit a record 4.37 dollars a gallon, and diesel prices have reached an all-time high of 6.31 dollars a gallon ahead of the winter demand season, while inventories have fallen to record lows. JPMorgan estimated a fair value of about 90 dollars a barrel for North Sea Brent crude for September, but with actual prices currently around 106 dollars, it analyzed that the market is pricing in further supply-loss risks on top of the 10 million barrels per day of supply it assumes has been disrupted. Global crude and petroleum product inventories have fallen by about 555 million barrels since the conflict began, but that is only about one-third of the decline the bank had forecast at the start of the year, and global oil demand is also running about 4.4 million barrels per day below the same period a year earlier, offsetting the impact of the supply losses. While substantial inventories remain, mainly in China, Europe, Japan and South Korea, and could serve as a buffer, the bank warned that if supply disruptions from the Middle East continue, inventories will fall further and crude prices could rise even more before the end of the year.
JPMorgan Chase & CoJPMorgan is the author of the oil-market analysis; no company-specific financial impact is described.
