The global energy market is facing an unprecedented supply shock.
Natasha Kaneva, JPMorgan Chase's Head of Commodities Research, stated in her latest report that the current global oil supply deficit has reached 16 million barrels per day, with a projected deficit of approximately 10 million barrels per day expected to persist in April. This scale far exceeds any historical supply disruption, and the buffer provided by policy tools is insufficient to bridge this gap.
<h2>The Duration is Uncertain, the Scale of the Deficit is Certain</h2>
JPMorgan Chase admits in its report that modeling &#34;unprecedented events&#34; such as a war in Iran and the closure of the Strait of Hormuz has pushed the boundaries of traditional analytical frameworks. Historically, no supply disruption has been identical in scale, geopolitical complexity, and strategic impact.
The biggest uncertainty lies in the duration: the US and Israel have sent mixed signals regarding the conflict's duration, while Iran itself seems to believe time is on its side. More importantly, even if hostilities cease, the Strait of Hormuz may not immediately resume normal traffic.
However, the structure of the shock is relatively clear: which barrels are at risk, which capacities can be rerouted or substituted, what are the limits of strategic reserves, and what are the boundaries of policy tools – these are quantifiable constraints. The timeline is uncertain, but the arithmetic does not lie.
<h2>Southeast Asian Commercial Inventories May Be Significantly Depleted</h2>
The disruption of Middle East flows has rapidly transmitted into a direct shortage of crude oil and refined products in Asia. Southeast Asia, with its high reliance on imports and limited domestic refining capacity, is particularly exposed.
Countries such as Indonesia, Thailand, Sri Lanka, Vietnam, Malaysia, Bangladesh, the Philippines, Myanmar, and Pakistan are likely to need to heavily draw upon their commercial refined product inventories – estimated at approximately 129 million barrels, which could contribute about 1 million barrels per day of supply replenishment over several months.
<h2>Floating Storage and Sanctions Waivers: Limited Marginal Impact</h2>
Iran holds approximately 38 million barrels of crude oil and refined products in floating storage, and Russia holds another approximately 17 million barrels. Combined, these two countries can release about 500,000 barrels per day of crude oil to the market.
However, the marginal impact of formally lifting sanctions on Iranian and Russian crude oil on actual supply may be limited – as most of these cargoes have already been continuously flowing to the market through alternative channels.
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The real significance lies in that the formal lifting of sanctions might encourage India's large state-owned refineries to procure more confidently, in larger volumes, and earlier, thus replacing more cautious private buyers.
Considering all the above buffering mechanisms, JPMorgan Chase believes that policy tools can only cushion the impact, not eliminate it. A supply deficit of approximately 10 million barrels per day is likely to persist.
Against this backdrop, the only remaining adjustment mechanism for the system is price increases and the subsequent demand destruction. High oil prices, coupled with tightening physical supply, have begun to trigger adjustments across the entire system.
<h2>Demand Destruction Has Arrived: Chemicals, Aviation, and Agriculture Under Full Pressure</h2>
Amidst supply constraints, refineries are significantly cutting operating rates due to raw material scarcity and negative cost spreads, leading to a substantial decline in product output, further exacerbating the already tight market for refined products.
From a product structure perspective, the impact of the Strait of Hormuz blockade is highly concentrated on naphtha, liquefied petroleum gas (LPG), and jet fuel.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d25890f6-bf57-48db-bd95-9ed2e0d51f1a.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d25890f6-bf57-48db-bd95-9ed2e0d51f1a.jpeg"/>
The chemical industry is hit particularly hard, as naphtha and LPG are core raw materials for products like ethylene; currently, approximately 5% of global ethylene capacity in Japan and South Korea has been shut down.
The aviation industry is also a critical pressure point. Jet fuel costs typically account for over 20% of operating expenses, and airlines are cutting routes, with Africa and Europe being particularly vulnerable.
Gasoline and diesel, as the largest demand components, can be suppressed through coordinated policies, including stay-at-home orders, reduced speed limits, and odd-even traffic restrictions. Diesel shortages will also directly impact the agricultural, construction, and transportation sectors, posing substantial pressure on fuel supplies for heavy equipment such as tractors and excavators.

JPMorgan Chase warns that the Hormuz crisis has caused a global oil deficit of up to 16 million barrels per day. Strategic reserves, sanctions waivers, and other policy tools are proving insufficient, with a deficit of approximately 10 million barrels per day likely to persist long-term. The chemical, aviation, and agricultural sectors are under pressure, with Southeast Asia bearing the brunt. As price increases become the sole adjustment mechanism, demand destruction is spreading across the entire system

- The global energy market faces an unprecedented supply shock, with a projected oil supply gap of 10 million barrels per day.  
- JPMorgan's report highlights that disruptions from conflicts in Iran and strategic considerations could lead to long-lasting impacts, particularly affecting Southeast Asian countries reliant on imports.  
- The potential for demand destruction is evident across various sectors, with significant reductions in production and operations due to the rising costs of raw materials and constrained supplies.

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JPMorgan Quantifies Oil Shock: Global Oil Supply Deficit May Persist at 10 Million Barrels Daily, Policy Tools Likely Insufficient