J.P. Morgan on Wednesday revised down its price trajectory for Brent crude oil in the second half of 2026, attributing the change to weaker commercial inventory draws and demand deterioration relative to prior expectations.
In its updated outlook, the bank projects Brent will average $86 per barrel in the third quarter and $80 per barrel in the fourth quarter, with prices falling to $78 by the end of 2026.
According to the research note, OECD commercial inventory draws have underperformed expectations while losses to demand have been larger than the bank previously forecast. That combination has reduced the upward pressure on prices the bank had anticipated.
J.P. Morgan described the market rebalancing as occurring through a notably different mix of demand losses and inventory withdrawals than it had originally expected. The bank highlighted current oil flows at roughly 8.6 million barrels per day, and said flows have averaged 6.3 million barrels per day in June so far - a materially higher level than those seen in April and May.
The note also stated that private operators have largely refrained from drawing down their oil inventories, instead depending almost entirely on government Strategic Petroleum Reserve releases to keep refinery operations running.
For its second-half forecast, J.P. Morgan anticipates an additional draw of 50 million barrels from OECD inventories between April and July.
The bank warned that, given the scale of the projected oversupply in the fourth quarter of 2026 and the first half of 2027, production would likely need to be reduced in early 2027 after a period of near-maximized output in late 2026.
Context and implications
The bank’s adjustments center on two principal developments it observed in market data: weaker-than-expected commercial inventory withdrawals in OECD stocks, and demand contraction that has exceeded prior forecasts. These two forces together have altered the composition of the market rebalance, prompting the bank to lower its near-term Brent price path.
The note also underlines the growing role of government SPR releases in maintaining refinery throughput as private inventories remain largely intact.